The Government of Pakistan unveiled the federal budget for 2025-26 on June 16, 2025, introducing key changes to the Income Tax Deductions Chart for salaried individuals. This update aims to provide tax relief amid rising inflation, helping employees manage their finances better.
In this detailed guide, we will explain the revised Income Tax Deductions Chart, including tax slabs, benefits, calculation methods, and allowances. Whether you’re a salaried professional, a business owner, or a freelancer, this article will help you understand your tax liabilities and savings for the fiscal year 2025-26.
What Is the Income Tax Deductions Chart?
The Income Tax Deductions Chart is an official table issued by the Federal Board of Revenue (FBR) that outlines how much tax salaried individuals must pay based on their income. It categorizes taxpayers into different salary brackets and applies progressive tax rates accordingly.
Why Is This Chart Important?
- Helps employees calculate their monthly/annual tax liability
- Allows better financial planning and budgeting
- Ensures accurate tax filing to avoid penalties
- Encourages tax compliance by simplifying the process
The 2025-26 update reduces tax burdens, particularly for middle and lower-income groups, making it easier to cope with economic challenges.
Why Was the Income Tax Deductions Chart Updated in 2025-26?
Pakistan’s economy has faced high inflation, rising living costs, and reduced purchasing power. To alleviate financial stress, the government revised tax policies with the following objectives:
✔ Reduce tax burden on salaried individuals
✔ Increase disposable income for better living standards
✔ Encourage tax compliance by making the system fairer
✔ Support middle-class professionals struggling with inflation
This revision aligns with Pakistan’s long-term economic reforms, promoting financial stability and growth.
Latest Income Tax Deductions Chart for 2025-26 (Salaried Individuals)
Below is the updated Income Tax Deductions Chart for salaried individuals in Pakistan, comparing 2024-25 and 2025-26 tax rates:
| Monthly Salary (PKR) | Tax in 2024-25 | Tax in 2025-26 | Monthly Relief |
|---|---|---|---|
| 50,000 | 0 | 0 | 0 |
| 100,000 | 2,500 | 500 | 2,000 |
| 150,000 | 10,000 | 6,000 | 4,000 |
| 200,000 | 19,167 | 13,500 | 5,667 |
| 250,000 | 31,667 | 25,000 | 6,667 |
| 300,000 | 45,833 | 38,833 | 7,000 |
| 400,000 | 78,750 | 71,750 | 7,000 |
| 500,000 | 113,750 | 106,750 | 7,000 |
| 1,000,000 | 317,625 | 307,738 | 9,888 |
| 2,000,000 | 702,625 | 689,238 | 13,388 |
Source: Federal Board of Revenue (FBR)
Key Takeaways from the Updated Chart:
- No tax for individuals earning below PKR 50,000/month
- Significant tax relief for salaries between PKR 100,000–500,000
- Higher-income earners (PKR 1M+) also benefit from reduced rates
New Income Tax Slabs for 2025-26 (Annual Income)
The FBR has revised tax slabs for salaried individuals based on annual income:
| Annual Income (PKR) | Tax Rate |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 2.5% (on amount exceeding 600,000) |
| 1,200,001 – 2,200,000 | Rs. 6,000 + 11% (on amount above 1,200,000) |
| 2,200,001 – 3,200,000 | Rs. 116,000 + 23% (on amount above 2,200,000) |
| 3,200,001 – 4,100,000 | Rs. 346,000 + 30% (on amount above 3,200,000) |
| Above 4,100,000 | Rs. 616,000 + 35% (on amount above 4,100,000) |
Example Calculation:
If your annual salary is PKR 1,500,000:
- First 600,000 = 0% tax
- Next 600,000 (600,001–1,200,000) = 2.5% of 600,000 = PKR 15,000
- Remaining 300,000 (1,200,001–1,500,000) = 11% of 300,000 = PKR 33,000
- Total Tax = PKR 15,000 + 33,000 = PKR 48,000/year (PKR 4,000/month)
Use the FBR Tax Calculator for precise calculations.
How to Use the Income Tax Deductions Chart (Step-by-Step Guide)
- Determine Your Monthly/Annual Salary
- Check your payslip or bank statement for exact earnings.
- Find Your Tax Bracket
- Refer to the 2025-26 tax slabs (monthly or annual).
- Calculate Tax Liability
- Apply the relevant tax rate to your income.
- Subtract Tax from Salary
- The remaining amount is your take-home pay.
- Use Online Tools for Accuracy
- Websites like TaxCalculator.pk automate calculations.
Benefits of the Updated Income Tax Deductions Chart (2025-26)
✅ Higher Savings – Lower taxes mean more disposable income.
✅ Simplified Tax System – Easier to understand and file returns.
✅ Middle-Class Relief – Biggest benefits for PKR 100,000–500,000 earners.
✅ Encourages Compliance – Fairer taxes reduce tax evasion.
✅ Better Financial Planning – Employees can budget effectively.
Additional Allowances & Benefits in Budget 2025-26
Besides tax cuts, the government announced:
✔ 10% Adhoc Relief Allowance – For federal employees on basic pay.
✔ 30% Disparity Reduction Allowance – To reduce pay gaps in government jobs.
✔ PKR 6,000/month Special Conveyance Allowance – For disabled employees.
✔ 7% Pension Increase – Benefiting retired government workers.
These measures aim to improve living standards and boost employee morale.
Explore More:
- Oil Price Forecast 2025 – How energy costs impact your budget
- Value Funds vs. Growth Funds – Tax-efficient investment options
- For accurate tax calculations, always refer to theFBR website or use verified tools like TaxCalculator.pk. Stay updated with the latest tax policies to maximize your savings!
Pakistan Income Tax Deductions 2025-26: Complete FAQs
Here’s a detailed FAQs section to address common taxpayer queries about Pakistan’s updated income tax system:
General Tax Questions
1. Who needs to file income tax returns in Pakistan for 2025-26?
All salaried individuals earning above PKR 600,000 annually (PKR 50,000 monthly) must file returns. This includes:
- Full-time employees
- Contractual workers
- Part-time professionals
- Pensioners above the threshold
2. What’s the tax-free income limit for 2025-26?
The zero-tax bracket has been maintained at:
- PKR 600,000 annually (PKR 50,000 monthly)
- No tax deducted at source below this amount
3. How has the tax burden changed compared to last year?
Key changes include:
- 25-30% reduction in taxes for middle-income earners (PKR 100k-500k/month)
- Higher relief at lower income brackets
- Marginal decreases for high earners (PKR 1M+/month)
Tax Calculation & Filing
4. How is monthly tax calculated under the new system?
The progressive tax system applies in stages:
- First PKR 50,000: 0%
- Next PKR 50,000 (50,001-100,000): 0.5%
- Next PKR 50,000 (100,001-150,000): 7.5%
- And so on according to tax slabs
Example: For PKR 200,000 salary:
- First 50k: 0
- Next 50k: PKR 250
- Next 50k: PKR 3,750
- Last 50k: PKR 9,500
Total tax = PKR 13,500
5. When is the tax filing deadline?
Important dates:
- 30 September 2026: Deadline for salaried individuals
- 31 December 2026: Extended deadline with penalty
- 30 June 2026: Deadline for businesses
6. What documents are needed for filing?
Essential records include:
- Salary slips (12 months)
- Bank statements
- CNIC copy
- Proof of tax deductions (if any)
- Investment certificates (for deductions)
Tax Savings & Deductions
7. What are the major tax-saving options?
Common deductions under Section 62:
- Life insurance premiums (up to 10% of income)
- Approved pension funds (up to 10%)
- Health insurance (up to PKR 250,000)
- Charitable donations (up to 30% of income)
8. Can I claim house rent tax exemption?
Yes, if:
- Rent exceeds 10% of basic salary
- Proper rent agreement is registered
- Landlord’s CNIC is provided
- Maximum deduction: 50% of basic salary or PKR 75,000/month
9. Are electric vehicle (EV) tax benefits still available?
Yes, until June 2026:
- 10% tax credit on EV purchases
- No sales tax on local EV assemblies
- 50% reduction in withholding tax on EV financing
Special Cases
10. How are freelancers taxed differently?
Freelancers fall under:
- Fixed tax regime: 1-5% of receipts (based on income)
- Normal tax slabs: If opting for standard taxation
- Must register with PSEB (Pakistan Software Export Board) for benefits
11. What if I have multiple income sources?
All incomes are aggregated:
- Calculate tax on total income
- Subtract already-paid taxes
- Pay balance by filing return
Exception: Capital gains have separate taxation
12. Are there penalties for late filing?
Yes:
- PKR 1,000/day for first 30 days
- PKR 5,000/day after 30 days
- Maximum penalty: PKR 100,000
Technical Queries
13. How to verify tax deductions?
Methods:
- Online: Via FBR’s IRIS portal
- SMS: Send CNIC to 9966
- Bank statement: Check monthly deductions
14. What if my employer isn’t deducting tax?
You must:
- File voluntary return
- Pay calculated tax
- Submit Form 114 (if applicable)
- Avoid audit risks
15. How to claim refunds?
Process:
- File return with refund claim
- Submit proof of excess deduction
- Wait 60-90 days for processing
- Receive via cheque/bank transfer
Future Changes
16. Will taxes increase next year?
No official announcement yet, but:
- IMF agreements may influence future rates
- Tax base expansion likely over rate hikes
- Digital monitoring to improve compliance
17. Are cryptocurrency earnings taxable?
Current status:
- No clear policy (under review)
- Capital gains tax may apply
- Must declare in wealth statement
For more details on tax-efficient investing, see our guide on value funds vs growth funds.