How Much Tax on Salary in Pakistan? (2025–26 Slabs, Explained)
Mubeen Sardar
Founder, PSXAssist · Lahore, Pakistan
Built these finance tools after overpaying tax one year and underpaying zakat the next: both times because of guesswork. The calculators exist so the same mistake costs someone else a lot less.
Quick Answer
For FY 2025–26: zero tax on annual income up to Rs. 600,000 (Rs. 50,000/month). Above that, marginal slabs of 5%–35% apply only on the amount exceeding each threshold: not your full salary. A Rs. 100,000/month salary pays Rs. 2,500/month in tax. Effective rate: 2.5%.
Pakistan has two reliable monthly occurrences: the cricket team finding a creative new way to collapse in a chase, and your employer deducting income tax before the money reaches you. At least one of these is calculable. This is the guide to that one.
Most salary tax articles list the slabs and stop. This one explains how the slabs actually work, what your employer does and does not handle on your behalf, how filer status changes your tax life beyond salary, and two legal routes to reduce what you owe: with real PKR numbers throughout.
How Tax Slabs Actually Work: And Why Most People Have It Backwards
Pakistani income tax uses a progressive marginal system. Each slab rate applies only to the slice of income within that band: not to your total salary from rupee one.
If you earn Rs. 1,200,001 per year, you are not taxed at 15% on everything. You pay 0% on the first Rs. 600,000, then 5% on the next Rs. 600,000 (= Rs. 30,000), then a trivial amount on that single extra rupee. The 15% rate touches only the income above Rs. 1,200,000.
This distinction matters enormously. I have heard the phrase "I don't want a raise: it'll push me into a higher bracket" more times than I can count. Every time, the person saying it was earning less money to avoid paying a few thousand rupees more in tax on the extra income only. I have done the maths. It never works out in their favour. (I have started bringing a printed table to family gatherings. My relatives now sit at the other end of the room.)
The FY 2025–26 Income Tax Slabs for Salaried Persons
The rates below are for salaried individuals only, as notified by the Federal Board of Revenue (FBR). Non-salaried and business income follow a different: and less favourable: schedule.
| Annual Taxable Income (PKR) | Tax Payable |
|---|---|
| Up to 600,000 | Nil |
| 600,001 – 1,200,000 | 5% on amount exceeding Rs. 600,000 |
| 1,200,001 – 2,200,000 | Rs. 30,000 + 15% on excess over Rs. 1,200,000 |
| 2,200,001 – 3,200,000 | Rs. 180,000 + 25% on excess over Rs. 2,200,000 |
| 3,200,001 – 4,100,000 | Rs. 430,000 + 30% on excess over Rs. 3,200,000 |
| Above 4,100,000 | Rs. 700,000 + 35% on excess over Rs. 4,100,000 |
The exemption threshold: Rs. 600,000/year, Rs. 50,000/month: is untouched in every calculation, regardless of your total salary. It sits at the bottom. The rates above it are marginal. Your effective rate is always lower than your bracket rate.
Real Salary Examples: What You Actually Pay Each Month
The table below shows the actual numbers across six common salary levels. These are not estimates: they are the slab calculations applied exactly as FBR specifies.
| Monthly Salary | Annual Income | Annual Tax | Monthly Cut | Effective Rate |
|---|---|---|---|---|
| Rs. 50,000 | 600,000 | Rs. 0 | Rs. 0 | 0% |
| Rs. 75,000 | 900,000 | Rs. 15,000 | Rs. 1,250 | 1.7% |
| Rs. 100,000 | 1,200,000 | Rs. 30,000 | Rs. 2,500 | 2.5% |
| Rs. 150,000 | 1,800,000 | Rs. 120,000 | Rs. 10,000 | 6.7% |
| Rs. 200,000 | 2,400,000 | Rs. 230,000 | Rs. 19,167 | 9.6% |
| Rs. 300,000 | 3,600,000 | Rs. 550,000 | Rs. 45,833 | 15.3% |
The highlighted row is the most-searched case: Rs. 100,000/month. Annual tax Rs. 30,000. Monthly deduction Rs. 2,500. If your employer is deducting more, you are owed a refund. If they are deducting less, you will owe it at year-end: and FBR does not send a warm reminder.
Also notice: even at Rs. 300,000/month, the effective rate is 15.3%: not 35%. The 35% marginal rate only applies to income above Rs. 4,100,000/year. The actual rate on your total salary is always considerably lower because the lighter lower bands apply first.
The Surcharge: Only for Incomes Above Rs. 10 Million
If your annual salary exceeds Rs. 10,000,000 (roughly Rs. 833,333/month), an additional 9% surcharge applies on the income tax due on the portion above Rs. 10 million. This is a tax on your tax: which is an impressive piece of fiscal creativity.
To be precise: the surcharge is calculated on the tax amount attributable to income above Rs. 10 million, not on the income itself. If you are earning at this level, a qualified tax consultant is not optional. The surcharge is just one of several complexities that kick in above this threshold.
How Your Employer Deducts Tax: And What They Get Wrong
At the start of the financial year, your employer estimates your total annual income, calculates the tax due using the slab table, divides by 12, and deducts that amount monthly. This is withholding. The government collects before you see the money: a policy designed by someone who clearly understood human nature and found it lacking.
The problem is that employers calculate based on your salary package alone. They do not know about:
- Profit on debt: returns from savings certificates, prize bonds, or a savings account
- Capital gains from shares or mutual fund redemptions: see the CGT calculator for Pakistan for those
- Rental income: even from a single property
- Investment tax credits you are entitled to claim (pension funds, VPS mutual funds)
- Zakat deductions paid on eligible assets during the year
If any of these apply to you, your employer's monthly deduction is an approximation. Filing your own annual return through FBR's IRIS portal is how you correct it, claim refunds, and become an active filer. Which leads to the section most salary tax guides quietly skip.
Filer vs. Non-Filer: Where the Real Cost Appears
Your income tax slab rates are identical whether you are a filer or not. That is where most guides stop. Here is where the actual difference lives: the moment you do anything significant with the money you earned: withdraw it, buy property, invest in shares, get a dividend: the withholding rates diverge sharply.
| Transaction | Filer | Non-Filer | On Rs. 5m |
|---|---|---|---|
| Bank cash withdrawal (above Rs. 50k) | 0.1% | 0.6% | Rs. 25,000 |
| Property purchase | 2% | 4% | Rs. 100,000 |
| Vehicle purchase | 1% | 3% | Rs. 100,000 |
| Dividend income (shares / funds) | 15% | 30% | Rs. 750,000 |
| Prize / raffle winnings | 15% | 25% | Rs. 500,000 |
On a single Rs. 10 million property purchase, the filer/non-filer difference is Rs. 200,000. On dividend income from shares, it is double the rate. Becoming a filer means registering with FBR, getting an NTN number, and filing an annual return through IRIS. The process takes one afternoon. It saves real money on every significant financial transaction you make for the rest of your life.
This is not advice. It is an observation about what filers pay versus what non-filers pay: every single year.
Two Legal Ways to Actually Pay Less Tax
Both require filing a return. Neither works any other way. Both are written into the Income Tax Ordinance 2001.
1. Investment tax credits (pension funds and VPS)
Contributions to approved pension funds or investments in mutual funds under the Voluntary Pension System qualify for a direct tax credit: not just a deduction from income, but a reduction in the tax itself. The credit is capped at the lower of: 20% of your taxable income, or the actual contribution amount.
On a Rs. 150,000/month salary with Rs. 120,000 in annual tax, contributing Rs. 200,000 to an approved VPS fund generates a meaningful credit. The SIP calculator shows the growth side of regular investing. The tax credit is the side most people miss entirely.
2. Teacher and researcher reduction (25%)
Full-time teachers and researchers employed at any recognised educational institution: school, college, university: receive a 25% reduction on their total income tax liability. On an annual tax bill of Rs. 60,000, that is Rs. 15,000 returned. On Rs. 200,000, it is Rs. 50,000.
The majority of eligible teachers never claim it. Because the employer does not apply it automatically. It lives in the annual return, waiting for someone to ask. Most people never ask. Most years, the FBR keeps the difference.
The Most Common Mistake: Avoiding Income to "Stay Out of a Higher Bracket"
Someone I know turned down overtime because he calculated it would cross a slab threshold. He was earning Rs. 1,150,000/year. The extra work would bring him to Rs. 1,250,000.
Here is what his maths actually said. The Rs. 50,000 above the Rs. 1,200,000 threshold crosses into the 15% band. Tax on Rs. 50,000 at 15% = Rs. 7,500. He declined Rs. 100,000 in additional income to avoid Rs. 7,500 in additional tax. Net loss from "protecting his bracket": Rs. 92,500.
He still insists he made the right call. He is a good friend and completely wrong about this.
Crossing a slab boundary costs you tax on the amount that crosses: nothing more. Every rupee you earn above a threshold is taxed at that band's rate on that specific rupee alone. You always come out ahead by earning more.
Rule of Thumb
For most salaried Pakistanis earning between Rs. 600,000 and Rs. 2,400,000/year: your effective tax rate sits between 2.5% and 10% of gross income. The marginal rates look alarming. The actual rate on total income is considerably lower: because the Rs. 600,000 exemption sits at the base of every calculation, untouched.
Frequently Asked Questions
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