Income Tax Slabs 2025-26 Pakistan – FBR Salaried & Business Rates
The Federal Board of Revenue (FBR) has updated the income tax slabs for the fiscal year 2025-26 under the Finance Act 2025. Below is the complete breakdown for both salaried individuals and business / self-employed persons.
🧑💼 Salaried Persons — Tax Slabs (FY 2025-26)
| Annual Income (PKR) | Tax Rate | Tax Calculation |
|---|---|---|
| Up to 600,000 | 0% | Nil |
| 600,001 – 1,200,000 | 1% | 1% of amount above 600,000 |
| 1,200,001 – 2,200,000 | 11% | Rs. 6,000 + 11% of amount above 1,200,000 |
| 2,200,001 – 3,200,000 | 23% | Rs. 116,000 + 23% of amount above 2,200,000 |
| 3,200,001 – 4,100,000 | 30% | Rs. 346,000 + 30% of amount above 3,200,000 |
| Above 4,100,000 | 35% | Rs. 616,000 + 35% of amount above 4,100,000 |
Applies to employment income, including salary, wages, and allowances.
🏢 Business / Self-Employed (AOP) — Tax Slabs (FY 2025-26)
| Annual Income (PKR) | Tax Rate | Tax Calculation |
|---|---|---|
| Up to 600,000 | 0% | Nil |
| 600,001 – 800,000 | 5% | 5% of amount above 600,000 |
| 800,001 – 1,200,000 | 12.5% | Rs. 10,000 + 12.5% of amount above 800,000 |
| 1,200,001 – 2,400,000 | 20% | Rs. 60,000 + 20% of amount above 1,200,000 |
| 2,400,001 – 3,600,000 | 25% | Rs. 300,000 + 25% of amount above 2,400,000 |
| 3,600,001 – 6,000,000 | 30% | Rs. 600,000 + 30% of amount above 3,600,000 |
| Above 6,000,000 | 35% | Rs. 1,320,000 + 35% of amount above 6,000,000 |
Applies to individuals running a business, freelancers, consultants, and Association of Persons (AOP).
Key Differences: Salaried vs Business
| Feature | Salaried | Business / AOP |
|---|---|---|
| 0% threshold | Up to PKR 600,000 | Up to PKR 600,000 |
| Rate at PKR 1M income | 1% | 5% |
| Rate at PKR 2M income | 11% | 20% |
| Maximum rate | 35% | 35% |
| Employer deducts WHT? | Yes (monthly) | No (self-paid via CPR) |
Important Notes
- Salaried individuals: Employer must deduct withholding tax monthly
- Business persons: Must pay advance tax quarterly and file an annual return
- Annual return deadline: September 30 each year (extensions may be granted by FBR)
- A 10% surcharge applies on income exceeding PKR 10 million
- Active tax filers get better WHT rates on property, banking, and other transactions
Try Our Calculator
Use our Income Tax Calculator → which supports both Salaried and Business slabs for FY 2025-26 and shows exactly which slab was applied to your income.
Understanding Progressive Taxation — A Practical Example
Many Pakistanis believe they pay their top tax rate on their entire income — this is a common misconception. Pakistan uses a progressive (marginal) tax system, meaning each portion of your income is taxed only at the rate applicable to that bracket, not your entire income at the highest bracket you reach.
Let's walk through a real example. Suppose you are a salaried employee earning PKR 150,000 per month (PKR 1,800,000 annually) in FY 2025-26:
| Income Portion | Rate | Tax on This Portion |
|---|---|---|
| First PKR 600,000 | 0% | PKR 0 |
| PKR 600,001 – 1,200,000 (next PKR 600,000) | 1% | PKR 6,000 |
| PKR 1,200,001 – 1,800,000 (next PKR 600,000) | 11% | PKR 66,000 |
| Total Annual Tax | Effective: 4% | PKR 72,000 |
Your effective tax rate is only 4%, even though your income falls in the 11% bracket. This is the power of progressive taxation — you are never taxed on your full income at the highest rate.
How to Reduce Your Income Tax Legally in Pakistan
FBR allows several legitimate deductions and credits that reduce your taxable income or tax payable:
- Charitable Donations: Donations to approved NPOs and charities (listed under Section 61 of the Income Tax Ordinance) can be deducted — up to 30% of taxable income for individuals.
- Education Expenses: Tuition fees paid for your children to registered educational institutions are deductible — up to PKR 60,000 per child, maximum two children.
- Health Insurance Premium: Premiums paid for health insurance policies (for self and spouse) are deductible up to PKR 150,000 per year.
- Investment in Approved Pension Funds: Contributions to VPS (Voluntary Pension Scheme) are deductible up to 20% of taxable income for persons under 40 years of age.
- Profit on Debt (Mortgage Interest): Interest paid on a housing loan for your first residential property is deductible up to PKR 2,000,000 per year.
Becoming a Tax Filer — Why It Matters
Being on the Active Taxpayer List (ATL) published by FBR gives you significant financial benefits beyond just legal compliance:
- Lower withholding tax on banking transactions: Non-filers pay 0.6% WHT on cash withdrawals above PKR 50,000; filers are exempt.
- Lower WHT on property purchases: Non-filers pay significantly higher withholding tax rates when buying or selling property.
- Vehicle registration: Non-filers pay higher token tax and face restrictions on buying vehicles above 1,000cc.
- Business contracts: Many government and corporate tenders require active filer status.
- Refund eligibility: Only active filers can claim tax refunds from FBR for excess withholding tax deducted.
Filing a return costs nothing if you use the FBR IRIS portal yourself, and can save you tens of thousands of rupees annually in reduced withholding tax rates alone.
Tax on Salary vs Freelance / Digital Income
Pakistan's tax treatment of freelancers and digital workers has improved significantly. As of FY 2025-26:
- Freelancers earning foreign remittances through approved payment channels (Payoneer, Wise, direct bank transfer) are eligible for a 1% fixed tax regime on gross receipts — much lower than regular business rates.
- Income earned through platforms like Upwork, Fiverr, or Toptal qualifies if remitted through State Bank–approved channels within 30 days of receipt.
- You must register on FBR IRIS as a business individual and file returns annually to access this concessional rate.
- IT companies and software exporters registered with PSEB enjoy a reduced corporate tax rate of 20% instead of the standard 29%.
Frequently Asked Questions — Income Tax Slabs Pakistan 2025-26
A PKR 50,000/month salary equals PKR 600,000 annually. For FY 2025-26, PKR 600,000 falls exactly at the zero-tax threshold. Tax payable = PKR 0. If your salary is PKR 50,001/month (PKR 600,012 annually), only PKR 12 falls in the 1% bracket — meaning just PKR 0.12 in tax. Effectively, anyone earning PKR 50,000/month or less pays zero income tax in Pakistan.
PKR 100,000/month = PKR 1,200,000 annually. Under FY 2025-26 salaried slabs: 0% on PKR 600,000 = PKR 0 | 1% on PKR 600,001–1,200,000 = PKR 6,000. Total annual tax = PKR 6,000 (PKR 500/month). This is a very low effective rate of 0.5%. Use our Income Tax Calculator to calculate for any salary amount.
Yes. The Finance Act 2025 revised salaried tax slabs upward, providing moderate relief to middle-income earners. The key changes include adjusted bracket thresholds and rate revisions. The 0% bracket remains at PKR 600,000 for salaried persons. Always use an up-to-date calculator like HisaabPK for accurate FY 2025-26 figures rather than relying on last year's slabs.
Use the cumulative tax method: (1) Find which slab your income falls in. (2) Add fixed tax for all lower slabs. (3) Apply marginal rate to income exceeding the last slab threshold. Example for PKR 1,500,000 annual salary: Fixed tax for 600,001–1,200,000 slab = PKR 6,000. Remaining: PKR 300,000 at 11% = PKR 33,000. Total = PKR 39,000. Our calculator does this instantly — just enter your income.
No. Freelance income is generally taxed under business/AOP slabs, not salaried slabs. However, freelancers registered under FBR's IT export scheme may qualify for a 1% final tax on foreign remittances up to USD 10,000/month. For domestic freelance work (paid in PKR), normal business slabs apply. Freelancers must file annual returns and maintain basic accounts. Many Pakistani freelancers mistakenly don't file — this makes them non-filers and triggers higher withholding tax on all banking transactions.
Non-resident Pakistanis are taxed only on Pakistan-source income — rental income from Pakistani property, dividends from Pakistani companies, and business income earned in Pakistan. Foreign remittances sent to Pakistan are generally not taxable income for the recipient. However, if a non-resident has significant Pakistan-source income, they may need to file a return. Overseas Pakistanis should consult a tax practitioner to avoid unexpected liabilities on property sales or rental income.
📚 Calculate Your Tax Now
On PKR 300,000/month (PKR 3,600,000 annually), salaried tax calculation for FY 2025-26: 0% on first PKR 600,000 = PKR 0; 5% on PKR 600,001–1,200,000 = PKR 30,000; 15% on PKR 1,200,001–2,200,000 = PKR 150,000; 25% on PKR 2,200,001–3,200,000 = PKR 250,000; 30% on PKR 3,200,001–3,600,000 = PKR 120,000. Total annual tax: PKR 550,000 (PKR 45,833/month). Use our Income Tax Calculator to check any salary.
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