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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%.