Impact of tax rate increase on individuals-13.10.2022
The Inland Revenue Amendment Bill, which was published on 11th October 2022, reduced the personal tax relief for resident and non-resident individuals to Rs.1.2Mn per year, introduced slabs of Rs.500,000 intervals, and increased the maximum tax rate from 18% to 36%.
Thus, a person's tax liability has gone up drastically compared to the situation up until the 1st of October 2022.
Ex : If a monthly salary of an individual is Rs.350,000 tax will be calculated as follows for two periods.
| Description | Up to 30th Sep 2022 (Rs) | W.e.f 01st Oct 2022) (Rs) |
| Monthly salary | 350,000 | 350,000 |
| Personal tax releif | (250,000) | (100,000) |
| Taxable Income | 100,000 | 250,000 |
| Tax liability | ||
| 100,000* 6% | 6,000 | |
| First 500,000/12*6% | 2,500 | |
| Next 500,000/12 *12% | 5,000 | |
| Next 500,000/12*18% | 7,500 | |
| Next 500,000/12 *24% | 10,000 | |
| Next 500,000/12 *30% | 12,500 | |
| Balance 500,000/12*36% | 15,000 | |
| Monthly tax | 6,000 | 52,500 |
**Expenditure relief of Rs.1.2Mn which was available prior to Amendments has not been considered for the calculation.
In other words, an individual who paid Rs.6,000 per month until 30th September 2022 now has to pay Rs.52,500 per month. The effective tax rate has gone up 15% from 1.7%.
