If you live and work in Pakistan, you must pay income tax if your earnings exceed the tax-free threshold. The amount of tax you owe depends on which tax slab your income falls into.
Pakistan follows a progressive tax system, meaning higher-income earners pay a higher tax percentage. Knowing how these tax slabs work helps you:
✔ Avoid unnecessary tax deductions
✔ Plan your finances effectively
✔ Take advantage of legal tax-saving options
How Pakistan’s Income Tax System Works
1. What Are Progressive Tax Slabs?
Pakistan uses a progressive tax system, where:
✅ Lower-income earners pay a lower tax rate
✅ Higher-income earners pay a higher tax rate
For example, if your salary is PKR 1,500,000, you do not pay a flat tax on the full amount—you pay different rates on different portions of your income.
2. Difference Between Taxable Income and Gross Income
Your gross income includes:
✔ Basic salary
✔ Bonuses and commissions
✔ Allowances (housing, medical, etc.)
Your taxable income is calculated after removing tax-exempt amounts and applicable deductions.
Pakistan’s Latest Income Tax Slabs for 2024-2025
1. Tax Slabs for Salaried Individuals
| 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: Tax rates apply progressively—not on the full income but on portions of it.
2. Tax Slabs for Business & Self-Employed Individuals
The tax rates for business owners, freelancers, and self-employed professionals are slightly different. The exact tax rates depend on business income and structure, and FBR provides separate tax brackets for different types of businesses.
Step-by-Step Guide to Calculating Your Income Tax
Let’s assume your annual salary is PKR 1,500,000.
Step 1: Apply Tax Slabs
- First PKR 600,000 → 0% tax = PKR 0
- 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
How to Reduce Your Tax Legally
You can lower your taxable income by claiming:
✔ Charitable donations (approved organizations)
✔ Retirement and pension fund contributions
✔ Education and health insurance expenses
✔ Zakat deductions
These deductions reduce your taxable income, lowering your final tax liability.
Click here to read more: https://calculatetax.pk/
How to Pay Your Income Tax in Pakistan
1. Salary Tax Deduction by Employer
If you work for a company, your employer deducts tax from your salary and deposits it with FBR every month.
2. Self-Payment (For Freelancers & Business Owners)
If you have business income or freelancing earnings, you may need to pay tax manually via:
✅ FBR’s e-Payment system
✅ Online banking & ATM transfers
How to File Your Tax Return with FBR
1️⃣ Register on FBR IRIS Portal (https://iris.fbr.gov.pk)
2️⃣ Enter Your Salary & Income Details
3️⃣ Declare Additional Assets & Liabilities
4️⃣ Apply for Deductions & Tax Credits
5️⃣ Submit Your Tax Return Before the Deadline
? Deadline: Usually September 30th (FBR may extend it).
Penalties for Non-Filing or Late Filing
? Fine for Late Filing: Up to PKR 40,000
? Higher Withholding Tax (WHT) for non-filers
? Legal action & account freezing for tax evasion
Benefits of Being a Tax Filer in Pakistan
✔ Lower Withholding Tax (WHT) on banking, car purchases, and property transactions
✔ Higher chances of getting bank loans
✔ Avoid legal penalties
✔ Eligibility for government contracts and incentives
Common Myths About Tax in Pakistan
❌ "Only business owners pay tax." → No, salaried employees and freelancers must also 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 over PKR 600,000 annually are required to file tax returns.
Conclusion
Understanding Pakistan’s income tax slabs is essential for managing your finances and staying compliant with FBR regulations. By correctly calculating your tax liability, you can plan your expenses, reduce tax legally, and enjoy financial benefits.
If you haven’t filed your taxes yet, now is the best time to start!
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 tax?
By claiming deductions for charity, pension funds, and Zakat payments.
3. How do I check my tax filer status?
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.
