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 →

Sources: Federal Board of Revenue (fbr.gov.pk), Finance Act 2026; EOBI (eobi.gov.pk). Estimate only — not tax advice.