If you’re earning a salary in Pakistan, you are required to pay income tax if your income exceeds the tax-free threshold. The Federal Board of Revenue (FBR) collects income tax based on progressive tax slabs, meaning higher-income earners pay a higher percentage of tax.
Knowing how to calculate salary tax helps you:
✔ Avoid penalties for non-compliance
✔ Plan your savings efficiently
✔ Maximize tax deductions legally
Income Tax Slabs for Salaried Individuals (2024-2025)
Income tax for salaried employees in Pakistan follows a progressive tax system, where tax rates increase as income levels rise.
| Annual Income (PKR) | Tax Rate (%) |
|---|---|
| Up to 600,000 | 0% (Tax-Free) |
| 600,001 – 1,200,000 | 2.5% |
| 1,200,001 – 2,400,000 | 12.5% |
| 2,400,001 – 3,600,000 | 20% |
| 3,600,001 – 6,000,000 | 25% |
| 6,000,001 – 12,000,000 | 32.5% |
| Above 12,000,000 | 35% |
📌 Note: The tax is calculated cumulatively—you only pay the higher tax rate on the portion of your income that falls within each bracket.
How to Determine Your Taxable Income
Your gross salary includes:
✔ Basic salary
✔ Allowances (house rent, medical, transport)
✔ Bonuses and commissions
However, some portions of your salary may be exempt from tax:
❌ Medical allowance (up to a certain limit)
❌ Contributions to approved pension/provident funds
Your taxable salary = Gross Salary – Exemptions & Deductions
Step-by-Step Guide to Calculating Salary Tax
Let’s assume your annual salary is PKR 1,500,000.
Step 1: Apply Tax Slabs
- First PKR 600,000 → 0% tax (No tax)
- Next PKR 600,000 (1,200,000 – 600,000) → 2.5% tax = PKR 15,000
- Remaining PKR 300,000 (1,500,000 – 1,200,000) → 12.5% tax = PKR 37,500
Step 2: Total Tax Payable
Total tax = PKR 15,000 + 37,500 = PKR 52,500 per year
📌 Monthly tax deduction = PKR 52,500 ÷ 12 = PKR 4,375 per month
Click here to read more: https://calculatetax.pk/
Tax Deductions and Exemptions
You can legally reduce your taxable income by claiming deductions on:
✔ Charitable donations to approved organizations
✔ Investment in pension funds
✔ Zakat payments
✔ Health insurance premiums
📌 These deductions lower your total taxable income, reducing your final tax liability.
How to Pay Your Income Tax in Pakistan
1. Salary Tax Deduction by Employer
- If you’re a salaried employee, your employer automatically deducts tax from your salary and deposits it with FBR.
2. Self-Payment (For Non-Salaried Individuals)
- If you have additional income (freelancing, rental, business), you may need to pay tax manually via:
✅ FBR’s e-Payment system
✅ Online banking & ATM payments
How to File Your Tax Return as a Salaried Employee
1️⃣ Register on FBR IRIS Portal (https://iris.fbr.gov.pk)
2️⃣ Enter Personal & Salary Details
3️⃣ Declare Additional Income & Assets
4️⃣ Claim Deductions & Credits
5️⃣ Submit Tax Return Before the Deadline
📌 Deadline: Usually September 30th (subject to FBR extensions).
Penalties for Non-Filing or Late Filing
🚨 Penalty for Late Filing: Up to PKR 40,000
🚨 Higher Withholding Tax (WHT) for non-filers
🚨 Legal action & account freezing for repeated tax evasion
Benefits of Being a Tax Filer
✔ Lower Withholding Tax (WHT) on banking, car purchase, and property transactions
✔ Higher chances of getting bank loans
✔ Avoid legal penalties
✔ Eligible for government incentives
Common Tax Myths in Pakistan
❌ “Only business owners pay tax.” → No, all income earners above PKR 600,000 must pay tax.
❌ “Filing tax means paying extra money.” → Filing ensures you pay the correct amount, avoiding penalties.
❌ “Freelancers don’t need to file tax.” → Freelancers earning above PKR 600,000 are required to file tax returns.
Conclusion
Calculating salary tax in Pakistan is simple once you understand the tax slabs and exemptions. By filing your tax returns on time, you not only comply with FBR regulations but also enjoy financial benefits such as lower withholding taxes and access to banking services.
If you haven’t filed your taxes yet, now is the best time to get started!
FAQs
1. How much salary is tax-free in Pakistan?
Annual income up to PKR 600,000 is tax-free.
2. How can I reduce my salary tax legally?
By claiming deductions for charity, pension funds, and Zakat payments.
3. How do I check if I am a tax filer?
Visit FBR’s ATL portal and enter your CNIC number.
4. What happens if I don’t file my tax return?
You may face penalties, higher withholding tax, and legal action.
