If you're salaried in Pakistan, your income tax isn't a flat percentage of your salary — it's calculated using progressive slabs, where each portion of your income above a threshold is taxed at a higher rate. That trips a lot of people up, so here's how it actually works.
How progressive tax slabs work
Pakistan's salary tax slabs (as periodically notified by the FBR) define income bands, each with its own rate. Income within the first band is tax-free, the next band is taxed at a low rate, and each subsequent band is taxed at a higher rate — but only on the portion of income that falls inside that band, not your entire salary.
For example, if the first Rs. 600,000 of annual income is tax-free and the next band up to Rs. 1,200,000 is taxed at 5%, someone earning Rs. 900,000 a year pays 0% on the first Rs. 600,000 and 5% only on the remaining Rs. 300,000 — not 5% on the whole Rs. 900,000.
A worked example
Say your annual taxable salary is Rs. 1,800,000:
- The portion within the tax-free band is untaxed.
- The portion within the next band is taxed at that band's rate.
- Only the remaining portion above that reaches the next, higher rate.
You add up the tax owed from each band separately, then sum them — that total is your annual tax liability, which your employer typically withholds monthly under the withholding tax rules.
Why the exact numbers matter
Slab thresholds and rates are revised in the Finance Act most years, so a guide with hardcoded numbers can go stale within months. Rather than publish figures here that might already be outdated by the time you read this, use the calculator below — it's kept editable and clearly labeled so you can cross-check the slab it's using against the latest FBR notification.
Common mistakes to avoid
- Applying the top rate to your whole salary instead of just the portion within that band.
- Forgetting taxable allowances — some allowances are fully taxable, others are exempt up to a limit.
- Ignoring rebates and credits you may be eligible for (e.g. for certain investments or donations), which reduce your final liability after the slab calculation.