Introduction
The tax rate on salary in Pakistan is given in the Division I Part I of the First Schedule of the Income Tax Ordinance, 2001:
Table of Contents
| Salary Income |
Rate |
| Where the salary income=<600,000 | 0% |
| 1,200,000>=Salary income>600,000 | 5% of the amount>600,000 |
| 2,200,000>=Salary income>1200,000 | 30,000+15% of amount>1,200,000 |
| 3,200,000>=Salary income>2,200,000 | 180,000+25% of amount>2,200,000 |
| 4,100,000>=Salary income>3,200,000 | 430,000+30% of amount>3,200,000 |
| Salary income>4,100,000 | 700,000+35% of amount>4,100,000 |
Application of Tax Rate on Salary in Pakistan
A withholding agent applies a tax rate on salary in Pakistan under Section 149 of the Income Tax Ordinance 2001 in accordance with the above-mentioned income tax rates on salary.
- The tax rate on salary in Pakistan is 0% up to Rs.600,000 for a year i.e. salary income up to Rs.600,000 is exempt from income tax.
- If the salary is more than Rs.600,000 but less than or equal to Rs.1,200,000, the tax rate on salary in Pakistan will be 5% of the amount exceeding Rs.600,000. For example, the income of a person from salary is Rs.800,000 per year. The tax payable is calculated as under: Amount Exceeding 600,000 = 800,000-600,000 = Rs.200,000 Tax payable = 200,000*5% = Rs. 10,000
- If the salary is more than Rs.1,200,000 but less than or equal to Rs.2,200,000, the tax will be 30,000 plus 15% of the amount exceeding Rs.1200,000. For example, the income of a person from salary is Rs.1,500,000 per year. The tax payable is calculated as under: Amount Exceeding 1,200,000 = 1,500,000-1,200,000 = Rs.300,000 Tax payable = 30,000+300,000*15% = Rs. 75,000
- If the salary is more than Rs.2,200,000 but less than or equal to Rs.3,200,000, the tax will be Rs. 180,000 plus 25% of the amount exceeding Rs.2,400,000. For example, the income of a person from salary is Rs. 3,000,000 per year. The tax payable is calculated as under: Amount Exceeding 2,200,000 = 3,000,000-2,200,000 = Rs.800,000 Tax payable = 180,000+800,000*25% = Rs. 380,000
- If the salary is more than Rs.3,200,000 but less than or equal to Rs.4,100,000, the tax will be Rs. 430,000 plus 30% of the amount exceeding Rs.32600,000. For example, the income of a person from salary is Rs. 4,000,000 per year. The tax payable is calculated as under: Amount Exceeding 3,200,000 = 4,000,000-3,200,000 = Rs.800,000 Tax payable = 430,000+800,000*30% = Rs. 670,000
- If the salary is more than Rs. 4,100,000, the tax will be Rs. 7,00,000 plus 35% of the amount exceeding Rs.4,100,000. For example, a person’s salary income is Rs. 8,000,000 per year. The tax payable is calculated as under: Amount Exceeding 4,100,000 = 8,000,000-4,100,000 = Rs.3,900,000 Tax payable = 700,000+3,900,000*35% = Rs. 2,065,000
FAQs
Q. How is tax calculated on salary in Pakistan?
Ans. The income tax on salary in Pakistan is calculated at the average rate of tax in accordance with the Division I Part I of the First Schedule of the Income Tax Ordinance, 2001.
Q. What is the Salary tax for 2023 in Pakistan?
Ans. The tax rate on salary in Pakistan exceeding Rs.600,000 ranges from 5% to 35% by the slabs prescribed in Division I Part I of the First Schedule of the Income Tax Ordinance, 2001.
Q. How much salary is exempt from income tax in Pakistan?
Ans. The salary income for a tax year is exempt from tax if it does not exceed Rs.600,000.
Q. How much tax do I pay on the salary income of Rs. 7.5 lakhs?
Ans. The tax on amount exceeding Rs. 600,000 (750,000-600,000=150,000) will be Rs.150,000*5%=Rs. 7,500
Q. How much tax do I pay on 20 lakhs?
Ans. The income tax on salary exceeding Rs.1200,000 (Rs.2000000-1200000=Rs.800,000) will be Rs.30,000+15%*800,000 = Rs.150,000