Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan. Salary is considered Pakistan-source income to the extent to which it relates to employment exercised in Pakistan, wherever paid.
Personal income tax rates
The following tax rates apply where income of the individual from salary exceeds 75% of taxable income:
| Taxable income (PKR*) | Tax on column 1 (PKR) | Tax on excess (%) |
| Over (column 1) | Not over |
| 0 | 600,000 | | 0 |
| 600,000 | 1,200,000 | | 2.5 |
| 1,200,000 | 2,400,000 | 15,000 | 12.5 |
| 2,400,000 | 3,600,000 | 165,000 | 22.5 |
| 3,600,000 | 6,000,000 | 435,000 | 27.5 |
| 6,000,000 | | 1,095,000 | 35.0 |
* Pakistani rupees
The following tax rates are applicable in other cases (for individuals and associations of persons [AOPs]):
| Taxable income (PKR) | Tax on column 1 (PKR) | Tax on excess (%) |
| Over (column 1) | Not over |
| 0 | 600,000 | | 0 |
| 600,000 | 800,000 | | 7.5 |
| 800,000 | 1,200,000 | 15,000 | 15.0 |
| 1,200,000 | 2,400,000 | 75,000 | 20.0 |
| 2,400,000 | 3,000,000 | 315,000 | 25.0 |
| 3,000,000 | 4,000,000 | 465,000 | 30.0 |
| 4,000,000 | | 765,000 | 35.0 |
Withholding requirements
In general, the entire tax is deducted at source on payment of salary to individuals at rates mentioned above for salaried individuals. Varying withholding tax (WHT) rates are prescribed for different goods, services, and contracts provided and executed by individuals and AOPs, based on status of the vendor being an active taxpayer or not.
Local taxes on income
The only significant tax on salaries is federal income tax.
FAQs
The Personal Income Tax Rate in Pakistan stands at 35 percent. Personal Income Tax Rate in Pakistan averaged 23.89 percent from 2006 until 2023, reaching an all time high of 35.00 percent in 2020 and a record low of 20.00 percent in 2007. source: Federal Board of Revenue, Government of Pakistan.
What is the tax slab for individuals in Pakistan? ›
The individual income tax brackets/rates for salaried individuals (at least 75% of income from salary) are amended as follows from tax year 2024: up to PKR 600,000 - 0% over PKR 600,000 up to 1.2 million - 2.5% over PKR 1.2 million up to 2.4 million - 12.5%
How is tax calculated on salary in Pakistan? ›
The income tax rate in Pakistan ranges from 5% to 35% depending on the individual's or company's income bracket. The income tax is calculated on the basis of the taxable income, which is the income earned after deducting expenses and exemptions.
How is personal income taxed? ›
The individual income tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest, and other income a person earns throughout the year. The tax is generally imposed by the state in which the income is earned.
How much foreign income is tax free in Pakistan? ›
Foreign remittances exceeding Rs 5 million do not attract any addition to income chargeable to tax. Only if the foreign remittance”s source is not explainable, such amount will be added in income chargeable to tax.
How to reduce tax on salary in Pakistan? ›
Invest in tax-saving schemes:
The government of Pakistan offers various tax-saving schemes such as National Savings Schemes (NSS), Mutual Funds, and Pension Funds that provide tax benefits to individuals. Investing in these schemes can help reduce your taxable income, thus reducing your tax liability.
What are the taxes in Pakistan? ›
The standard rate of sales tax is 18%, while it may range to 25% for luxury items etc. Federal Excise Duty: Federal Excise Duty (FED) is a tax levied on specific goods and services produced and consumed in Pakistan.
What is minimum tax in Pakistan? ›
A minimum tax is payable at 1.25% of turnover. An alternate corporate tax (ACT) also applies, where the minimum tax liability of the company is determined as the higher of 17% on accounting income or the corporate tax liability including the minimum tax on turnover.
How much is taxable income? ›
Taxable income is the portion of your gross income used to calculate how much tax you owe in a given tax year. It can be described broadly as adjusted gross income (AGI) minus allowable itemized or standard deductions.
Is pension taxable in Pakistan? ›
Exemptions: Age: Individuals above 60 years old are exempt from the double-dipping and multiple pension tax rules. Circular 28 of 1991: This circular clarifies that pensions are not taxable unless they fall under the double-dipping or multiple pension scenarios mentioned above.
Published Feb 14, 2024. Professional tax is a form of direct taxation imposed on individuals who earn income from their professional activities or services rendered. Professional tax is a crucial component of the national revenue system in Pakistan, contributing to the government's fiscal resources.
How to calculate basic salary from gross salary in Pakistan? ›
Basic salary = Gross pay- total allowances (medical insurance, HRA, DA, conveyance, etc.)
Which country has the highest personal income tax rate? ›
Ivory Coast
The country with beach resorts, rainforests, and a French-colonial legacy levies a massive 60% personal income tax – the highest in the world.
What income is not taxable? ›
Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.
What income amount is taxable? ›
For individual filers, calculating federal taxable income starts by taking all income minus “above the line” deductions and exemptions, like certain retirement plan contributions, higher education expenses, student loan interest, and alimony payments, among others.
