How can I calculate my income tax for the 2025 tax year as a salaried person in Pakistan?

Question

I am a salaried employee working in a private company in Lahore. I want to know how to calculate my income tax for the tax year 2025 according to the latest tax slabs announced in the Finance Act 2025. Should I calculate tax on my gross salary or taxable salary after deductions?

Answer 1

Here’s how income tax is calculated for a salaried employee for the 2025 tax year, based on the latest Finance Act 2025:

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Taxable Income, Not Gross Salary

You calculate tax on your taxable income, not your gross salary. Taxable income is:

• Your total annual income (salary + benefits)

• Minus allowable deductions, such as zakat, medical allowances, etc.

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Current Tax Slabs for Salaried Individuals (2025–26)

Based on the updated Finance Act 2025:

Taxable Income (PKR)	Tax Rate
Up to 600,000	0%
600,001 – 1,200,000	1% of the amount exceeding 600,000
1,200,001 – 2,200,000	PKR 6,000 + 11% of the amount exceeding 1,200,000
2,200,001 – 3,200,000	PKR 116,000 + 23% of the amount exceeding 2,200,000
3,200,001 – 4,100,000	PKR 346,000 + 30% of the amount exceeding 3,200,000
Above 4,100,000	PKR 616,000 + 35% of the amount exceeding 4,100,000
(Taxation in Pakistan)

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Example Calculation (From PwC Sample)

Let’s say your total income (salary + benefits) is PKR 5,500,000, and you have deductions of:

• Zakat: PKR 50,000

• Medical allowance: PKR 100,000

That gives a taxable income of PKR 5,350,000.

Tax calculation:

• On first 4,100,000 → PKR 616,000

• On remaining 1,250,000 → 35% → PKR 437,500

• Total tax due = PKR 1,053,500

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Additional Note: Surcharge for High Income

If your taxable income exceeds PKR 10,000,000, a surcharge applies at 9% (reduced from 10%, effective July 1, 2025) on the applicable amount.

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Quick Steps Summary

1. Determine your total annual income (salary + all benefits).

2. Subtract allowable deductions (like zakat, medical, donations, etc.).

3. Apply the income tax slab to your taxable income (not the gross).

4. If applicable, add surcharge on income above PKR 10 million.

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Want help estimating your own tax liability? Share your annual gross package and deductions, and I’ll walk you through your net tax payable!