How salary tax is calculated in Pakistan
Employers do not guess a rate. They annualise taxable pay, match the FBR salaried table, then withhold a monthly share under Section 149. The calculator below is that first step. StreamHCM payroll adds the second: a running average so the year still lands on the right total.
Open the calculatorSalary tax calculator
Runs entirely in your browser. Figures update as you type.
Finance Act 2026, gazetted 26 June 2026. Surcharge on salaried individuals withdrawn. Top 35% rate now starts above Rs. 7 million.
FY 2026-27 · salaried
FBR salaried slabs (FY 2026-27)
Highlight shows the slab your annual income currently falls into.
| Annual taxable income | Rate | Tax formula |
|---|---|---|
| Rs. Up to 600,000 | 0% | No tax |
| Rs. 600,001 – 1,200,000 | 1% | 1% of the amount exceeding Rs. 600,000 |
| Rs. 1,200,001 – 2,200,000 | 11% | Rs. 6,000 + 11% of the amount exceeding Rs. 1,200,000 |
| Rs. 2,200,001 – 3,200,000 | 20% | Rs. 116,000 + 20% of the amount exceeding Rs. 2,200,000 |
| Rs. 3,200,001 – 4,100,000 | 25% | Rs. 316,000 + 25% of the amount exceeding Rs. 3,200,000 |
| Rs. 4,100,001 – 5,600,000 | 29% | Rs. 541,000 + 29% of the amount exceeding Rs. 4,100,000 |
| Rs. 5,600,001 – 7,000,000 | 32% | Rs. 976,000 + 32% of the amount exceeding Rs. 5,600,000 |
| Rs. 7,000,001 – and above | 35% | Rs. 1,424,000 + 35% of the amount exceeding Rs. 7,000,000 |
The four-step withholding
Payroll guides used across Pakistan (Mercans, Asanify, HR Business Solutions) describe the same sequence. StreamHCM follows it, then tightens the monthly piece so a changing salary does not leave a hole at year-end.
- Build taxable income, not gross. Add every earning and allowance marked taxable. Skip lines that are exempt by design. A medical allowance inside 10% of basic is the usual example. Overtime and a taxable expense reimbursement join this total; a non-taxable claim does not.
- Annualise. For a stable salary, monthly taxable × 12. In StreamHCM the estimate is (income so far ÷ months elapsed) × 12, so a late joiner is not taxed as if they had been on the books since July.
- Apply the slab. Find the band. Tax = fixed tax for that band + rate × amount above the previous ceiling. Finance Act 2026's salaried table is the current one.
- Convert to this month. Simple calculator: annual tax ÷ 12. StreamHCM: tax due to date (annual × months/12) minus tax already withheld. The difference is this month's deduction, never a negative clawback.
Why a raise in March should not rewrite January
A spreadsheet that just does annual × 12 / 12 every month will under-withhold after a raise unless someone goes back and patches earlier months. The cumulative-average method charges the extra in the month the average jumps. Months already paid stay as they were. That is the behaviour StreamHCM's tax ledger is built around, and it is why a bonus month looks “heavy” on tax. It is catching up, not punishing the employee twice.
What payroll cannot claim for you
Zakat under Section 60, education expenses under Section 60D, donation credits under Section 61, and Voluntary Pension Scheme credits under Section 63 are return-time claims. An employer who tries to bake them into monthly withholding is guessing. File the return; that is where those documents are used. The Institute of Corporate and Taxation's 2026-27 deductions note is a clear walkthrough of that split.
Filing is also how you stay a filer. Withholding on salary does not replace the return, and falling off the Active Taxpayer List changes rates on banking and property transactions even if the employer deducted every month.
Run the slab table on its own, or put tax next to EOBI and loans on the payroll calculator.
Salary tax questions
Annualise taxable monthly pay, find the FBR slab, compute annual tax (fixed amount + rate on the excess), then divide by 12 for a flat-salary month. StreamHCM instead uses a cumulative average so a raise or bonus in month 7 is withheld in month 7, not spread backwards.
No. Section 149 withholding is an advance. You still file so you can claim Zakat, donation credits and pension credits, and so you stay on the Active Taxpayer List.
Components flagged taxable: basic, most allowances, overtime, bonuses. Medical allowance is commonly exempt up to 10% of basic if the company is not also reimbursing medical costs. StreamHCM never taxes the whole gross if a line is marked non-taxable.
Rule 43 of the Income Tax Rules, 2002: deposit within 7 days of deduction. A quarterly withholding statement under Section 165 is due by the 20th after quarter-end.
Other HR tools on StreamHCM
Tax Slab Calculator
Run your monthly salary against the current FBR salaried slabs and see monthly tax, yearly tax and take-home. Updated for FY 2026-27.
Attendance Calculator
Turn present days, absences, late minutes, half-days and overtime into rupees using the same daily-rate and hourly-rate logic StreamHCM uses in payroll.
Payroll Calculator
Build a payslip from basic, allowances, overtime, EOBI, provident fund, loans, expense claims and FBR tax. The same stack StreamHCM runs on payday.
Deductions Calculator
Stack income tax, EOBI, provident fund, loan EMI, advances and attendance penalties to see what actually comes off gross before net pay.
Run this in live payroll, not a spreadsheet
StreamHCM applies the same FBR slabs, attendance rules, EOBI and expense-claim logic across every employee, then generates the payslip.