How to Calculate Income Tax in Pakistan 2025-26 — Slabs, Examples & Filing Guide

Pakistan Income Tax System Overview

Pakistan's income tax system is administered by the Federal Board of Revenue (FBR) under the Income Tax Ordinance, 2001. Every resident individual, association of persons, and company earning above a specified threshold is required to file an annual income tax return and pay applicable taxes. The tax year in Pakistan runs from July 1 to June 30, so the tax year 2025-26 covers the period from July 1, 2025, through June 30, 2026.

Pakistan follows a progressive tax system, which means that higher income earners pay a larger percentage of their income in taxes. The government revises tax slabs periodically through the Finance Act, and the rates for salaried individuals differ from those for non-salaried persons and businesses. Understanding which slab applies to your income is the first step toward calculating your tax liability accurately.

It is important to note that Pakistan distinguishes between filers and non-filers. Filers are individuals who have submitted their tax returns and appear on the Active Taxpayers List (ATL). Non-filers face higher withholding tax rates on banking transactions, vehicle purchases, property transfers, and other activities. Filing your return on time is therefore beneficial even if your taxable income falls below the exemption threshold.

Tax Slabs for Salaried Persons 2025-26

The following tax slabs apply to salaried individuals for the tax year 2025-26. These rates are based on your annual taxable income after allowable deductions:

• Up to PKR 600,000: No tax (0%). This is the exemption threshold for salaried persons.
• PKR 600,001 to PKR 1,200,000: 5% of the amount exceeding PKR 600,000.
• PKR 1,200,001 to PKR 2,400,000: PKR 30,000 plus 15% of the amount exceeding PKR 1,200,000.
• PKR 2,400,001 to PKR 3,600,000: PKR 210,000 plus 25% of the amount exceeding PKR 2,400,000.
• PKR 3,600,001 to PKR 6,000,000: PKR 510,000 plus 30% of the amount exceeding PKR 3,600,000.
• Above PKR 6,000,000: PKR 1,230,000 plus 35% of the amount exceeding PKR 6,000,000.

These slabs are cumulative, meaning you only pay the higher rate on the portion of income that falls within each bracket, not on your entire income.

Step-by-Step Calculation Example

Let us walk through a practical example. Suppose you earn a monthly salary of PKR 100,000. Here is how to determine your annual tax:

1. Calculate annual income: PKR 100,000 x 12 = PKR 1,200,000 per year.
2. Identify the applicable slab: PKR 1,200,000 falls at the top of the second slab (PKR 600,001 to PKR 1,200,000).
3. Calculate tax on the first slab: Income up to PKR 600,000 is exempt, so tax = PKR 0.
4. Calculate tax on the second slab: Income from PKR 600,001 to PKR 1,200,000 = PKR 600,000. Tax at 5% = PKR 600,000 x 0.05 = PKR 30,000.
5. Total annual tax: PKR 0 + PKR 30,000 = PKR 30,000.
6. Monthly tax deduction: PKR 30,000 / 12 = PKR 2,500 per month.

This means your employer would deduct approximately PKR 2,500 from your monthly salary as withholding tax. You can verify this calculation instantly using our Salary Calculator, which accounts for all current tax slabs.

Tax Filing with FBR

All taxpayers in Pakistan are required to file their annual income tax return through the IRIS portal, which is FBR's online tax filing system. Here is a simplified overview of the filing process:

1. Register on IRIS: Visit the FBR IRIS website and create an account using your CNIC (Computerized National Identity Card) number. You will receive a password via email or SMS.
2. Gather documents: Collect your salary certificates, bank statements, withholding tax certificates, and any investment or property documents.
3. Log in and select the return form: Salaried individuals typically use the simplified return form. Select the appropriate tax year (2025-26).
4. Enter income details: Fill in your salary income, any other income sources, deductible expenses, and tax credits.
5. Review wealth statement: You must also declare your assets and liabilities in the wealth statement section.
6. Submit and pay: Review the calculated tax, pay any remaining balance through a bank challan or online payment, and submit the return.

The filing deadline for salaried persons is typically September 30 following the end of the tax year, though extensions are sometimes granted by the government.

Tax Deductions and Exemptions

Pakistan's tax law provides several deductions and exemptions that can reduce your taxable income:

• Charitable donations: Donations to approved non-profit organizations and educational institutions can be claimed as a tax credit, subject to certain limits.
• Investment in approved pension funds: Contributions to voluntary pension schemes approved by the Securities and Exchange Commission of Pakistan (SECP) qualify for tax credits up to 20% of taxable income.
• Education expenses: Tuition fees paid to recognized educational institutions may qualify for limited tax relief.
• Medical allowance: Certain medical allowances provided by employers may be partially exempt from tax.
• Profit on debt: If you have a home loan, the interest (profit on debt) paid may be deductible from your taxable income up to a specified ceiling.

It is advisable to maintain proper documentation of all deductible expenses, as FBR may request supporting evidence during audits or assessments.

Freelancer Tax in Pakistan

Freelancers and self-employed individuals in Pakistan are taxed under non-salaried income provisions, which have different (and generally higher) tax rates compared to salaried persons. However, the government has introduced incentives to encourage the IT and freelancing sector.

Freelancers earning in foreign exchange through IT services or IT-enabled services may qualify for a reduced tax rate or exemption under certain conditions. To benefit from these incentives, freelancers should register with the Pakistan Software Export Board (PSEB) and ensure their foreign earnings are routed through proper banking channels.

Key points for freelancers:

• Register as a taxpayer: Obtain an NTN (National Tax Number) from FBR, even if you believe your income is exempt.
• Maintain records: Keep invoices, contracts, bank statements, and payment receipts for all freelance work.
• File annually: Submit your income tax return by the deadline to remain on the Active Taxpayers List and benefit from lower withholding rates.
• Claim business expenses: Legitimate business expenses such as internet costs, equipment, software subscriptions, and workspace rental can be deducted from your gross income to arrive at taxable income.
• Seek professional advice: Tax rules for freelancers change frequently, so consulting a qualified tax advisor is recommended to ensure compliance and maximize your savings.

Whether you are a salaried employee or a freelancer, understanding how income tax works in Pakistan empowers you to plan your finances better, take advantage of available deductions, and avoid penalties for late filing or underpayment. Use our Salary Calculator to estimate your after-tax income quickly and accurately.