3 Ways to Slash Your Salary Tax Burden

This article explores practical strategies to potentially minimize your salary tax in Pakistan. Remember, tax laws can change, so consulting a professional is recommended for personalized advice.

1. Utilize Medical Allowance Exemption:

• Income Tax Ordinance 2001 allows a 10% exemption on your basic salary for medical expenses.
• This reduces your taxable income, potentially lowering your tax bracket.

Example:

• If your monthly salary is Rs. 80,000 (including allowances), your basic salary might be Rs. 50,000.
• The 10% exemption reduces your taxable income to Rs. 45,000 (Rs. 50,000 - Rs. 5,000).

2. Negotiate Salary Structure with Employer:

• Consider requesting a higher basic salary with lower allowances.
• Since the basic salary enjoys a 10% tax exemption, this can be more tax-efficient.

Note: This approach depends on your employer's internal policies.

3. Manage Advance Tax Payments:

• If you've paid advance taxes or withholding taxes (e.g., on property, vehicles transfer, internet), inform your employer for potential tax credit.
• This reduces the amount of tax withheld from your salary.

Example:

• Imagine your annual tax liability is Rs. 15,000, but you paid Rs. 5,000 in advance tax.
• Inform your employer to adjust your monthly tax deductions accordingly.

Additional Tips:

• Review your salary slip to ensure allowances and basic salary are categorized correctly.
• Stay updated on any changes to tax slabs or rates announced in the budget.

Remember:

• These are suggestions; consult US for personalized guidance.
• Always comply with tax regulations while exploring tax-saving options.This article was published at Understanding Taxes on Income from Salary in Pakistan