Business Income Tax Slabs for Non-Salaried Individuals in Pakistan: 2025–26

Non-salaried individuals in Pakistan — sole proprietors, professionals in private practice, freelancers, traders, and partners in AOPs (Associations of Persons) — file income tax under a distinct set of slabs that differ materially from the salary-income slabs. The slabs for non-salaried business income are progressive and have historically been higher than salaried slabs at the upper end. This guide explains the current 2025–26 structure under the Income Tax Ordinance 2001 as amended by the Finance Act 2025.

The Distinction Between Salaried and Non-Salaried Slabs

Under Division I of Part I of the First Schedule to the Income Tax Ordinance 2001, different slab structures apply depending on whether income is derived under the head "salary" or under other heads (business, profession, property income above threshold, capital gains treated as ordinary income). A taxpayer is treated as "salaried" only if at least 75 percent of their taxable income is salary. If business income exceeds 25 percent of total taxable income, the entire income is taxed under the non-salaried (business) slabs — which are steeper.

This is a trap for professionals who earn a mix of salary and consulting income, and for business owners who take a small salary from their own company alongside dividend or capital gains income. Getting the classification wrong at filing stage leads to demand notices and recomputation. We regularly assist clients in recharacterising returns where this error has been made.

Non-Salaried Slabs for Tax Year 2025–26

For taxable business income of non-salaried individuals and AOPs, the slabs are progressive. Verify current Finance Act 2025 rates on the FBR IRIS portal before filing, as rates are revised each budget cycle:

• Up to Rs. 600,000 — 0% (exempt)
• Rs. 600,001 to Rs. 1,200,000 — 15% of the amount exceeding Rs. 600,000
• Rs. 1,200,001 to Rs. 1,600,000 — Rs. 90,000 + 20% of the amount exceeding Rs. 1,200,000
• Rs. 1,600,001 to Rs. 3,200,000 — Rs. 170,000 + 30% of the amount exceeding Rs. 1,600,000
• Rs. 3,200,001 to Rs. 5,600,000 — Rs. 650,000 + 40% of the amount exceeding Rs. 3,200,000
• Above Rs. 5,600,000 — Rs. 1,610,000 + 45% of the amount exceeding Rs. 5,600,000

These rates apply to the residual taxable income after allowable deductions (business expenses, depreciation under the Third Schedule, carried-forward losses). Compare these with salary slabs — at the upper end, the non-salaried rate reaches 45 percent, a full 10 percentage points above the top salaried rate.

Surcharge Under Section 4AB

A surcharge of 10 percent of income tax applies under Section 4AB of the Ordinance where taxable income exceeds Rs. 10 million. This is a surcharge on the tax itself, not on income — a critical distinction when computing. The surcharge is in addition to the slab tax and is charged on the full tax liability as computed under the slabs, before any withholding adjustments.

Minimum Tax Under Section 113

Section 113 imposes a minimum tax on turnover for loss-making or low-margin businesses. The default rate is 1.25 percent of turnover, with reduced rates for specific sectors (petroleum dealers, rice mills, oil refineries). If the tax computed on net income under the slabs is less than the minimum tax, the taxpayer pays the higher amount. Minimum tax paid in excess of normal tax can be carried forward and set off against normal tax liability in subsequent years under specific conditions.

Minimum tax is a significant drag on businesses with low profitability but high turnover — trading companies, distributors, contractors. Tax planning for such businesses focuses on substantiating actual losses and establishing entitlement to the carry-forward credit.

Advance Tax Installments

Non-salaried taxpayers pay advance tax in four quarterly installments under Section 147. The first three are equal to 25 percent of the preceding year’s tax liability each, with the fourth adjusting to the actual year-end figure. Failure to pay advance tax on due dates attracts default surcharge at 12 percent per annum on the shortfall, compounded quarterly until settlement or filing of the return.

For newly established businesses or those with significantly varying income, an estimated return can be filed under Section 147(6) to adjust the installment downward, but this requires supporting projections and is scrutinised by FBR.

Withholding Tax Credits

Non-salaried taxpayers are subject to numerous withholding provisions — Section 153 on payments for goods and services, Section 236K on property purchases, Section 233 on brokerage, and others. Amounts withheld are credits against final tax liability. Accurate tracking of CPRs (Computerised Payment Receipts) and reconciliation with the Taxpayer Withholding Statement on IRIS is essential. We see 20–30 percent of return-filing errors arise from mismatched withholding credits.

Filing Deadline and ATL

For non-salaried individuals and AOPs, the annual tax return is due by 30 September following the tax year. Filing by the deadline keeps the taxpayer on the Active Taxpayer List (ATL), which halves withholding tax rates on banking transactions, property, and vehicle purchases. Late filers pay a surcharge of Rs. 1,000 (individuals) or Rs. 10,000 (AOPs) for each month of delay, and face higher withholding rates under non-filer treatment until the return is filed.

Use our Tax Calculator to estimate your liability under the current slabs. For complex returns — multiple income heads, AOP computation, minimum tax scenarios — speak with our tax team.