In Pakistan, Basic salary is the amount paid to an employee before the additions and deductions of a pay packet. It’s the base on which other elements, including allowances, bonuses and taxes, are based. For purposes of computing the basic salary, an employer usually deducts from the gross salary all allowances and other additions.
Here’s how to understand basic salary calculation in Pakistan:
- Gross Salary: This is the entire remuneration an employee earns before any deductions. That includes the base salary plus any bonuses, overtime, and allowances.
- Allowances: These are additional payments made by the employer to meet certain expenses such as house rent (HRA), transportation (conveyance allowance), and medical expenses.
- Deductions: These are deductions from the gross salary, such as income tax, Employee’s Old-Age Benefits Institution (EOBI) contribution, and all other such mandatory payroll deductions.
While many are struggling and trying to make ends meet, Pakistan is currently facing several income tax changes starting from July 2025 that affect the monthly net amount and annual tax earning of a working individual. It’s important that you know the income tax calculation rules that have been announced, including the recent Income Tax Slabs for 2019-20. In this blog, we have done a comparison of tax on salary in Pakistan – 2025 vs 2026, detailing the impact that it would have on both the employees and employers.
Income Tax Slabs for the Year 2025-26
Below is the comparison between the tax rates for the year 2025-26. As per the latest income tax regulations for the year 2025–2026, the following slabs and income tax rates will be applicable for salaried individuals:
| Annual Income | Tax Rate (2025) | Tax Rate (2026) |
| Up to 600,000 | 0% | 0% |
| 600,000-1,200,000 | 5% | 1% |
| 1,200,000-2,200,000 | 15% (Rs. 30,000+15%) | 11% (Rs. 6,000+11%) |
| 2,200,000-3,200,000 | 25% (Rs. 180,000+25%) | 23% (Rs. 116,000+23%) |
| 3,200,000-4,100,000 | 30% (Rs. 430,000+30%) | 30% (Rs. 346,000+30%) |
| Exceeding 4,100,000 | 35% (Rs. 700,000+35%) | 35% (Rs. 616,000+35%) |
Tools for Tax Calculation on Salary
To make your tax planning smoother, leverage these resources:
- FBR Official Salary Tax Calculator
- HR-provided salary slips for real-time monthly tax deduction
- Tax advisory firms offering employee tax planning packages
How is Tax Calculated on the Salary of an Individual?
- Determine your annual gross salary
(Salaries + Allowances + Bonus (if taxable)
- Know which Income Tax Slab applies to you
Use the current year’s Income Tax Slab announced by FBR (e.g., FY 2025-26).
- Multiply the slab rate to taxable income.
Now deduct the exemption limit (e.g., PKR 600,000 or PKR 800,000) and apply the relevant percentage rates on the balance of income according to the slab.
- Consider any deductions or allowances
Certain benefits (medical claim, gratuity, Zakat etc.) may be exempted depending on your profile.
- Take the sum of the yearly tax payable and divide it by 12.
This gives you the monthly tax deduction from your salary.
Key Tax Reliefs and Exemptions
- Medical allowances for employee medical treatment, hospitalization, or family hospitalization expenses are tax-exempt.
- Up to 10% of basic salary is not taxable if no facility is provided.
- Zakat and Usher Ordinance allows special direct deductions.
- Tax credit granted on donations to recognized non-profit organizations.
- Donations from individuals to associates are capped at 15% of taxable income.
- Certain designated institutions have migrated into the tax credit system, reducing tax benefit cap for charitable donations.
2026 Tax Calculation – What’s Changing?
Proposed Adjustments in Income Tax Slabs:
- Exemption threshold could be increased from PKR 600,000 to PKR 800,000
- New slab introduced at high earners above PKR 12 million with a rate of 40%
- Single Lower slab rates for ease of understanding and automation
These changes aim to:
- Relieve the burden on the poor and middle class
- Increase the tax burden on high-net worth individuals.
- Encourage digital filing, through a revised salary tax calculator 2025-26 Pakistan.
Stay Updated with CBM Consultants
CBM Consultants contributes significantly in helping salaried people to calculate tax on salary in a proper way. By using the right income tax slabs and being in line with the current FBR regulations, we make certain that the employees are on the right tax amount and that they aren’t paying more or less than they should be. We also facilitate a tax efficient construction of the salary, incorporating tax free deductions and benefits, and hence allowing a legal reduction in the taxable income.
Furthermore, our experts assist people in demanding deductions such as Zakat, donations and assets so that tax liability decreases even more. These outlets also manage the income tax returns duly prepared and filed, containing claims for refunds where necessary, in a correct and timely manner. In case of audits or FBR inquiries, we offer representation and compliance support.
Conclusion:
The federal budget 2025–26 is filled with positives for Pakistan’s salaried class. Lower rates and rationalized slabs will make you feel richer. Armed with knowledge of these modifications and some preplanning, you can enjoy the full advantages and leave the year-end surprises behind.
And if you are worried about making these changes to your revenue, fear not and employ a trustworthy tax and accounting firm such as CBM Consultants to make your financial year smarter and more efficient.