Pakistan Salary Tax Slabs 2025-26 Explained with Examples

Plain-language explanation of FBR salary tax slabs for 2025-26 with worked examples at different income levels, comparison with 2024-25, and tips for reducing your tax liability.

The Six Slabs for Salaried Persons

The Finance Act 2025 introduced revised income tax slabs for salaried individuals, effective from July 1, 2025 to June 30, 2026. The structure is progressive: the first Rs. 600,000 of annual income is completely exempt. Income between Rs. 600,001 and Rs. 1,200,000 is taxed at 1% of the amount exceeding Rs. 600,000. This is a significant reduction from the 5% rate that applied in the previous year.

The next bracket covers income from Rs. 1,200,001 to Rs. 2,200,000, taxed at Rs. 6,000 plus 11% of the amount exceeding Rs. 1,200,000. Income from Rs. 2,200,001 to Rs. 3,200,000 attracts Rs. 116,000 plus 23% of the excess over Rs. 2,200,000. The bracket from Rs. 3,200,001 to Rs. 4,100,000 carries Rs. 346,000 plus 30% of the excess. Finally, income above Rs. 4,100,000 is taxed at Rs. 616,000 plus 35% of the amount exceeding Rs. 4,100,000.

For very high earners, a surcharge of 9% of the income tax applies where taxable income exceeds Rs. 10,000,000 per annum. This was reduced from 10% in the previous year. The surcharge is calculated on the tax amount, not the income, so it adds 9% to whatever tax liability the slabs produce.

Worked Examples

If you earn Rs. 100,000 per month (Rs. 1,200,000 per year), your tax under the 2025-26 slabs is 1% of Rs. 600,000 (the amount above Rs. 600,000), which equals Rs. 6,000 per year or Rs. 500 per month. Under the previous year's rates, the same income attracted Rs. 30,000 in tax — a saving of Rs. 24,000.

If you earn Rs. 200,000 per month (Rs. 2,400,000 per year), the calculation works through three slabs: Rs. 0 on the first Rs. 600,000, Rs. 6,000 on the next Rs. 600,000 (at 1%), Rs. 110,000 on the next Rs. 1,000,000 (at 11%), and Rs. 46,000 on the remaining Rs. 200,000 (at 23%). Total: Rs. 162,000 per year or Rs. 13,500 per month.

If you earn Rs. 500,000 per month (Rs. 6,000,000 per year), the tax works through all six slabs and totals Rs. 1,281,000 per year — an effective rate of 21.35%. Under the previous year's slabs, the same income would have attracted Rs. 1,365,000, a saving of Rs. 84,000 under the new rates.

Reducing Your Tax Liability Legally

The Income Tax Ordinance provides several legitimate deductions and credits that reduce your taxable salary income. Zakat paid under the Zakat and Ushr Ordinance 1980 is fully deductible. Charitable donations to FBR-approved organisations are deductible up to 30% of taxable income. Investment in shares listed on the Pakistan Stock Exchange qualifies for a tax credit under Section 62. Contributions to approved pension funds or voluntary pension schemes qualify for a tax credit under Section 63.

Medical allowance up to 10% of basic salary is exempt from tax. If your employer provides a house or pays house rent, the exemption is calculated differently depending on whether you live in your own house, a rented house, or employer-provided accommodation. Gratuity received on retirement or termination is exempt up to certain limits. These exemptions and credits can reduce your effective tax rate by several percentage points.

Tax planning is not the same as tax evasion. Using the deductions, credits, and exemptions that the law provides is legal and encouraged. The key is to maintain proper documentation for every claim and to ensure that your wealth statement is consistent with your declared income.