How Income Tax on Salary Works in Pakistan
Pakistan taxes employment income under the Income Tax Ordinance 2001. If you're salaried, your employer withholds tax from each paycheck based on your projected annual salary — roughly one-twelfth of the yearly liability per month.
The 2026-27 slabs (Finance Act 2026)
For Tax Year 2027 (1 July 2026 – 30 June 2027), the first Rs 600,000 of annual salary is tax-free. Above that:
| Annual income (PKR) | Tax |
|---|---|
| 600,001 – 1,200,000 | 1% of excess over 600,000 |
| 1,200,001 – 2,200,000 | Rs 6,000 + 11% of excess over 1,200,000 |
| 2,200,001 – 3,200,000 | Rs 116,000 + 20% of excess over 2,200,000 |
| 3,200,001 – 4,100,000 | Rs 316,000 + 25% of excess over 3,200,000 |
| 4,100,001 – 5,600,000 | Rs 541,000 + 29% of excess over 4,100,000 |
| 5,600,001 – 7,000,000 | Rs 976,000 + 32% of excess over 5,600,000 |
| Above 7,000,000 | Rs 1,424,000 + 35% of excess over 7,000,000 |
The Finance Act 2026 lowered these rates compared to the previous year and abolished the extra surcharge that salaried individuals used to pay on high incomes.
Worked example
Annual salary of Rs 3,000,000: falls in the 2.2M–3.2M slab → Rs 116,000 + 20% × (3,000,000 − 2,200,000) = Rs 116,000 + Rs 160,000 = Rs 276,000/year, or Rs 23,000/month withheld. Monthly take-home ≈ Rs 227,000 before EOBI.
EOBI — the pension deduction
The Employees' Old-Age Benefits Institution (EOBI) takes 1% of the provincial minimum wage from the employee (the employer pays 5%). In 2026-27 that's roughly Rs 400/month in Punjab and KPK, Rs 430 in Sindh, Rs 407 in Islamabad. It mainly applies to lower-salaried staff in establishments with five or more workers.
What's taxable?
Basic salary, allowances, bonuses, overtime and most perquisites are all part of taxable salary income. There is no separate tax-free allowance for most employees — the Rs 600,000 threshold is the main relief.
Try it: Pakistan salary calculator →
Another worked example
Annual salary of Rs 4,200,000 (Rs 350,000/month): falls in the 4.1M–5.6M band. Tax = 541,000 + 29% × 100,000 = Rs 570,000/year. EOBI ≈ Rs 400 × 12 = Rs 4,800/year. Monthly take-home = (4,200,000 − 570,000) ÷ 12 − 400 = Rs 302,100.
Reading your Pakistani payslip
Your payslip shows gross salary, income tax (withheld monthly against the annual slab computation), and EOBI ≈Rs 400. The tax line should reflect the Finance Act 2026 slabs with no 10% surcharge — if your payroll still shows a surcharge line, it's outdated. At year-end, your employer issues a tax deduction certificate; keep it for your FBR return. Provident fund: employer contributions up to the statutory limit are exempt — check the current FBR circular for the exact ceiling.
Common mistakes
1. The abolished surcharge. The 10% surcharge on salaried income is gone from 2026-27 — don't pay it.
2. Old slab tables. Several band edges moved in Finance Act 2026; 2024-25 tables give wrong answers.
3. EOBI as 1% of salary. It's Rs 370/month flat (1% of minimum wage), whatever you earn.
Tax year and filing in Pakistan
Pakistan's tax year runs 1 July to 30 June — these slabs cover 2026-27 (1 July 2026 – 30 June 2027). Salary tax is withheld monthly and adjusted in your annual return, filed with FBR (usually by 30 September for individuals). Salaried individuals with only salary income and correct withholding often have a simple filing — but the return itself is still required.
Sources & verification
Figures compiled from: Federal Board of Revenue (FBR) — Finance Act 2026.
Last verified: 23 October 2026. This guide is an estimate, not tax advice.