How this instrument works
Pakistan's salaried income tax is levied on annual salary, not monthly pay, and it is marginal: each bracket's rate touches only the portion of income that lands within its own band, never the whole sum. The first Rs 600,000 a year is exempt outright. Above that, rates step up in five stages — 2.5%, 12.5%, 22.5%, 27.5%, then 35% on anything past Rs 4,100,000 — and each stage's tax builds on the total from the stage below it, which is why the sheet carries a running subtotal (t2 through t5) rather than jumping straight to a final number.
This schedule is specifically the one for salaried individuals, defined under Pakistan's tax law as someone whose salary makes up more than three-quarters of their taxable income. A self-employed consultant, a business owner, or an AOP (association of persons) files against a separate rate table with different thresholds, so a freelancer's return needs a different sheet entirely, even though the underlying arithmetic looks similar. Payroll staff use this one to sanity-check the tax an employer withholds monthly under Section 149 of the Income Tax Ordinance; an employee uses it to check that withholding against the annual figure before filing on FBR's IRIS portal.
The formula excludes anything the Finance Act treats as a separate adjustment — provincial taxes, Zakat deductions, tax credits for specific categories such as full-time teachers or researchers, and any tax already withheld and paid during the year. What comes out of this sheet is the gross annual liability before those adjustments are netted off, not the cheque either side actually writes.
- Enter your yearly salary before deductions into Annual taxable income, PKR — the default of 1,500,000 matches the worked example below.
- Check Tax through slab 2 (up to 1,200,000) — it is the flat 2.5% owed on whatever falls between Rs 600,000 and Rs 1,200,000, zero if you earn less than Rs 600,000.
- If your income runs higher, watch Tax through slab 3 (up to 2,200,000), Tax through slab 4 (up to 3,200,000) and Tax through slab 5 (up to 4,100,000) each add their bracket's share to the running total.
- Read Income tax payable (FY2023-24, salaried) for the final annual bill — every lower bracket's tax carried forward, plus 35% on any rupee past Rs 4,100,000.
Worked example — a Rs 1,500,000 salary
Take the default sheet: Annual taxable income, PKR set to 1,500,000. The first Rs 600,000 is untaxed, then Tax through slab 2 (up to 1,200,000) charges 2.5% on the Rs 600,000 sitting between Rs 600,000 and Rs 1,200,000 — a flat Rs 15,000 no matter how much higher the salary climbs past that point.
Because Rs 1,500,000 pushes past Rs 1,200,000, Tax through slab 3 (up to 2,200,000) adds 12.5% of the remaining Rs 300,000 — Rs 37,500 — onto that Rs 15,000, for a running total of Rs 52,500. The salary never reaches Rs 2,200,000, so Tax through slab 4, Tax through slab 5 and Income tax payable (FY2023-24, salaried) all hold at Rs 52,500: an average rate of 3.5% on the full salary, far below the 12.5% marginal rate charged on the last rupee earned.
Questions
Why isn't the tax just income multiplied by the top bracket rate?
Because the rate is marginal, not flat — only the rupees sitting inside a given bracket are taxed at that bracket's rate, and every bracket below it keeps its own lower rate. Multiplying the whole salary by the top rate a person's income reaches overstates the bill badly; the running t2-through-t5 subtotals in this sheet exist precisely to add each slice correctly instead.
Does this apply to a self-employed or business income?
No. Pakistan's salaried schedule, modeled here, applies only when salary makes up more than 75% of taxable income for the year. Business owners, sole proprietors and associations of persons are taxed under a separate rate table with different thresholds, so running freelance or business income through this sheet will misstate the liability.
Who actually needs to run this calculation?
Payroll or HR staff computing the monthly tax an employer must withhold from salary under Section 149 of the Income Tax Ordinance, and salaried individuals checking that withholding against their expected annual liability before filing a return through FBR's IRIS portal.
What is excluded from the payable figure this sheet shows?
Provincial taxes, Zakat deductions, tax credits for specific categories such as full-time teachers or researchers, and any tax already withheld during the year all sit outside this sum. The result is the gross annual liability set by the federal slabs alone, before those adjustments are netted against it.
Why doesn't crossing a threshold spike the bill?
Because only the income above a threshold moves into the higher rate — a salary of Rs 1,200,001 pays the higher 12.5% rate on one rupee, not on the whole Rs 1,200,001. The clamp in each bracket's formula caps how much of the income that bracket can tax, so the transition between brackets is gradual rather than a cliff edge.
Will these thresholds still be correct next tax year?
Not necessarily — Pakistan's Finance Act resets salaried income tax slabs and rates most years, and thresholds have shifted in nearby budgets. Treat the FY2023-24 figures here as that year's published schedule, and check FBR's current notified rates before using this for a return in a different tax year.
References
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.