How do I calculate income tax on my salary in Pakistan?
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Pakistan uses a progressive tax slab system. First, determine your annual taxable income (gross salary minus exempt allowances). If it's below Rs 600,000, you pay zero tax. For amounts above, each slab has a fixed component plus a percentage on the income within that slab. For example, with an annual salary of Rs 1,800,000 in FY 2025-26: Rs 6,000 (1% × Rs 600K above threshold) + Rs 66,000 (11% × Rs 600K in second bracket) = Rs 72,000 annual tax or Rs 6,000/month.
What is the tax-free income limit in Pakistan for 2025-26?
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The tax-free threshold for salaried individuals in Pakistan remains at Rs 600,000 per year (Rs 50,000 per month) for FY 2025-26. No income tax is payable if your annual gross salary is Rs 600,000 or below.
What changed from 2024-25 to 2025-26 tax rates?
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The Finance Act 2025-26 brought the most significant tax relief in years. The second bracket rate dropped from 2.5% to just 1%. The third bracket fixed tax fell from Rs 30,000 to Rs 6,000, and the marginal rate reduced from 15% to 11%. A person earning Rs 100,000/month saves approximately Rs 9,000 per year compared to 2024-25 rates.
Is medical allowance taxable for salaried employees in Pakistan?
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Medical allowance up to 10% of your basic salary per year is exempt from income tax under the Income Tax Ordinance 2001. For example, if your basic salary is Rs 80,000/month, medical allowance up to Rs 8,000/month (Rs 96,000/year) is completely tax-free. Any medical allowance above this 10% threshold is taxable as part of salary.
Do teachers pay less income tax in Pakistan?
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Yes. Teachers and researchers employed at recognized educational institutions in Pakistan receive a 25% tax reduction on their calculated income tax liability, per Income Tax Ordinance 2001 Section 149A. This means a teacher pays only 75% of what their income slab would normally require. This applies to all recognized schools, colleges, and universities in Pakistan.
What is the difference between a filer and non-filer?
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A filer is registered on FBR's Active Taxpayer List (ATL) and files their annual tax return. For salary income, both filers and non-filers pay the same slab-based tax. However, non-filers pay significantly higher withholding tax on property transactions (up to 4x more), vehicle purchases, banking transactions above Rs 50,000, dividends, and prize money. Becoming a filer is a major financial advantage beyond just the salary tax question.
When is the deadline to file my income tax return in Pakistan?
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For salaried individuals, the tax return deadline is typically September 30th of the following year. For FY 2024-25 (July 2024 – June 2025), the filing deadline is September 30, 2025. FBR frequently extends this deadline — check the latest notifications at fbr.gov.pk. Filing late attracts a penalty of Rs 1,000 per day (up to 0.1% of tax payable for delays beyond 60 days).
How do I become an active filer (ATL) in Pakistan?
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To become an active filer: (1) Register for an NTN (National Tax Number) at FBR IRIS portal — iris.fbr.gov.pk; (2) File your annual income tax return online via IRIS; (3) Your name appears on the ATL within 7–10 working days after filing. Your employer must already be deducting tax at source via salary withholding, but you still need to file the return to become an active filer.