Income Tax: understand the new salary discount – 06/05/2023 – Market

Since May 1st, with the correction of the Income Tax table by the Lula government, workers and retirees in the country have new income tax discounts on their salaries. In addition to the greater exemption for the first bracket, which rose from BRL 1,903.98 to BRL 2,112, increasing the number of those who do not pay tax, there is a simplified discount of BRL 528 for all income brackets.

According to the Federal Revenue Service, this BRL 528 deduction is made at source by companies and other payment agencies, but it can only be applied if it is more advantageous than the deductions provided for by law, such as the monthly deduction for those who have dependents. Anyone earning up to two minimum wages, which amounts to R$2,640 today, will no longer pay taxes.

The choice of model, however, does not rest with the worker, since the responsibility rests with the company, but the citizen can, at any time, request the Human Resources sector to make the change that is most beneficial to him, if for deductions legal or standard simplified discount.

For self-employed people who make the monthly payment of the IR through the payment of the Carnê-leão, the choice for the best taxation model is up to the professional when generating the Darf (Federal Revenue Collection Document). “If it is mandatory monthly collection, the taxpayer uses what he deems most beneficial”, says the Revenue.

Workers who are admitted to new jobs may also be asked which model should be applied in their payslip. Experts heard by Sheet explain what the citizen should consider when making the choice.

The first point, according to the Federal Revenue, is to add the monthly legal deductions and compare with the monthly R$ 528. Those who have dependents are entitled to a discount at source of BRL 189.59 per month, per dependent. This discount is applied before the IR rate, as well as the monthly contribution to the INSS.

By law, citizens who are not IR taxpayers may be considered dependents at source, such as a spouse or partner, child or stepchild up to 21 years old or up to 24 years old if attending university or technical education.

The Revenue made simulations that indicate that the new IR discounts are more advantageous for those earning a lower salary, between R$ 2,112.01 and R$ 5,000. Incomes from R$ 10,000 will have a smaller impact.

Daniel Viana, labor director at BWA Global, says that workers should not only consider their monthly situation to define the best taxation model. This is because, when declaring the IR, what counts is the annual income tax table.

“A smaller discount in the month may result in a smaller refund or higher payment in the annual adjustment statement. We need to know that, in the end, what we must consider is that there is an annual table and it is this that defines the amount to be paid in the year”, it says.

Viana also recalls that the provisional measure provides that the simplified discount of R$ 528 can only be applied if it is more beneficial. “The company is responsible for withholding income tax at source on amounts paid to individuals and therefore has the power to decide in this case”, he explains.

“In practice, software companies created the ‘most favorable condition’ parameter, which performs both calculations and applies the lowest value discount”, says the consultant.

The Revenue claims that it is guiding employers through official publications. The body has already published regulations on the subject —IN 2,141— and should soon make available a new version of the “Manual of Withholding Income Tax (Mafon) 2023” with updated information.

Which is the best IR model: simplified or legal deductions?

In general, the simplified discount is more advantageous for those who do not have many deductions, such as dependents, health care, education, private pension and alimony, say experts. The model with a standard discount of R$ 528 would be better for those who do not have deductions. However, who will make this account and choose is the company. The taxpayer who feels harmed can request a change in the taxation model.

In the case of the self-employed, the Revenue states that the taxpayer will be able to choose the taxation model when paying the tax. “If it is mandatory monthly collection, the taxpayer uses what he deems most beneficial”, says the tax authorities.

What will the 2024 income tax return look like?

There is no relationship between the choice of the monthly IR discount model, according to the Revenue. In the annual adjustment declaration, the taxpayer may make any option, without connection with what was adopted in each month of the calendar year.

According to the tax authorities, even those who choose the simplified monthly discount can opt for the legal deductions in the annual adjustment, if it is more advantageous in the declaration. The IR program itself makes these calculations and indicates what is best, that is, what guarantees the greatest refund or the lowest tax to be paid.

What has changed in the Income Tax table?

The federal government readjusted the Income Tax exemption range by 10.92%, which rose from R$ 1,903.98 to R$ 2,112. In addition, a standard discount of BRL 528 will be given in all income brackets. As a result, wages, retirement benefits and pensions of up to R$ 2,640 stopped paying the tax.

For other income brackets, there will also be a monthly relief and taxpayers must pay BRL 15.60 per month less in income tax compared to the amounts charged until April 30, 2023. In the year, the discount is BRL 187.20.

Will everyone pay less income tax?

Yes, everyone will be able to have a standard discount of R$ 528 in the Income Tax month by month or opt for the legal deductions already foreseen in the legislation. The new rule is more advantageous for those earning up to R$ 10,000, according to the Revenue. Higher wages will have a smaller benefit.

The calculations are that, with the new table, 13 million will be exempt from Income Tax. The government’s intention is that, until the end of the term, salaries of up to R$ 5,000 will no longer be charged with income tax.

What are the new Income Tax tables?

The old Income Tax table is valid until April 2023. The new table is applied from May 2023. The IR remained uncorrected for almost ten years, at the end of the Dilma government, the Temer government and the four years of the Bolsonaro government.

SEE THE MONTHLY INCOME TAX TABLE UNTIL APRIL 2023

Calculation basis (in BRL)	Rate (in %)	Installment to be deducted (in BRL)
Up to 1,903.98	–	–
From 1,903.99 to 2,826.65	7.5	142.80
From 2,826.66 to 3,751.05	15	354.80
From 3,751.06 to 4,664.68	22.5	636.13
Above 4,664.68	27.5	869.36

SEE THE MONTHLY INCOME TAX TABLE AS OF MAY 2023

Calculation Basis (BRL)	Rate (%)	Portion to be deducted from the IR (BRL)
Up to 2,112.00	zero	zero
From 2,112.01 to 2,826.65	7.5	158.40
From 2,826.66 to 3,751.05	15	370.40
From 3,751.06 to 4,664.68	22.5	651.73
Above 4,664.68	27.5	884.96

SEE THE ANNUAL INCOME TAX TABLE AS OF 2024, CALENDAR YEAR 2023

Calculation Basis (BRL)	Rate (%)	Portion to be deducted from the IR (BRL)
Up to 24,511.92	zero	zero
From 24,511.93 to 33,919.80	7.5	1,838.39
From 33,919.81 to 45,012.60	15	4,382.38
From 45,012.61 to 55,976.16	22.5	7,758.32
Above 55,976.16	27.5	10,557.13