Tax on Salary in Pakistan 2025-2026 — Complete Guide
If you are a salaried employee in Pakistan, your employer deducts income tax from your monthly salary under Section 149 of the Income Tax Ordinance 2001. This is called withholding tax, and it serves as an advance payment of your annual income tax liability. Understanding how salary tax works helps you ensure the correct amount is being deducted.
How Salary Tax Works in Pakistan
Your employer calculates your estimated annual salary, applies the applicable tax slab, and divides the total tax by 12 for monthly deduction. This is known as “tax deduction at source.” At the end of the year, you file your return and either pay any remaining tax or claim a refund.
Tax Slabs for Salaried Individuals 2025-2026
| Annual Taxable Income (PKR) | Tax Rate | Example: Tax on PKR 1,500,000 |
|---|---|---|
| Up to 600,000 | 0% | — |
| 600,001 — 1,200,000 | 5% | PKR 30,000 |
| 1,200,001 — 2,200,000 | 15% | PKR 45,000 |
| Total Tax Payable | PKR 75,000 | |
Monthly vs Annual Tax Calculation
Employers calculate tax on an annualized basis, not monthly. However, an alternative method allows employers to deduct tax based on the monthly salary multiplied by 12. Let’s compare:
Annualized Method (Most Common)
Estimate annual income, apply slab, divide by 12. This is the method used by most companies and is generally more accurate.
Monthly Calculation Method
Calculate tax on each month’s salary independently. This can result in over-deduction if your salary varies or if you join mid-year.
Deductions That Reduce Salary Tax
You can reduce your tax liability through these deductions:
- Zakat: Deduct Zakat paid during the year (no upper limit)
- Charitable Donations: Donations to FBR-approved organizations (up to 30% of income)
- Pension Fund Investment: Approved pension funds (up to 20% of income)
- Health Insurance: Premium paid for self and family (up to PKR 50,000)
- Education Expenses: Children’s education in approved institutions
What Happens If Your Employer Deducts Excess Tax?
If your employer deducts more tax than your actual liability, you can claim a refund when filing your annual return. The FBR will process your refund after verification, usually within 90 days of filing.
Tips for Salaried Individuals
- Provide your employer with accurate deduction proof early in the year
- File your return even if tax was fully deducted — it maintains your filer status
- Check your salary slip monthly to ensure correct deduction
- Consult a tax professional if you have multiple income sources
Frequently Asked Questions
Is salary tax deducted if my annual income is below PKR 600,000?
No. If your annual salary is below PKR 600,000, no tax should be deducted. If your employer deducts tax despite your income being below the threshold, contact your HR department immediately.
Can I change my tax deduction mid-year?
Yes. If your circumstances change (marriage, additional deductions, etc.), you can submit a revised withholding certificate to your employer for adjustment in remaining months.