Income tax touches almost every earner in Pakistan - salaried employees, sole traders, companies and property owners alike. Yet the rules sit across a large statute and dozens of FBR circulars, which makes them hard to navigate. This pillar guide pulls the essentials into one place: what income tax actually is, who has to pay it, how the tax year and residency work, the five heads of income, the headline rates for 2026-27, and how filing works. From here you can branch into every specialist guide in our tax cluster. For an instant figure on your pay, jump straight to our income tax calculator.
What is income tax in Pakistan?
Income tax is a direct federal tax levied on the income a person earns during a tax year. It is governed by the Income Tax Ordinance 2001 and the annual Finance Act, and it is administered by the Federal Board of Revenue (FBR). It is separate from indirect taxes such as sales tax and customs duty, which are charged on transactions rather than income.
The system is largely self-assessment: you (or your employer, on your behalf) calculate what is owed, pay it, and file a return declaring your income. A large slice of tax is also collected at source as withholding tax - deducted on salary, banking transactions, property deals, dividends and imports - and then adjusted against your final liability when you file. For a full breakdown of deductions at source, see our withholding tax rates guide.
Who has to pay it?
Anyone with taxable Pakistan-source income above the exemption limit is liable, whether an individual, an association of persons (AOP) or a company. For salaried individuals the exemption threshold is PKR 600,000 per year (PKR 50,000 a month). Beyond that, whether you must file a return is broader than whether you must pay - people who own certain immovable property, own a vehicle above a set engine capacity, or hold commercial or industrial connections may be required to file even where little or no tax is due.
Filing even a nil return is usually worth it: it puts you on the FBR Active Taxpayers List (ATL), which cuts the higher withholding rates that non-filers pay on banking, property and vehicles. See filer vs non-filer for the real cost gap.
The tax year and residency
Pakistan's normal tax year runs from 1 July to 30 June and is named after the year in which it ends. So tax year 2026 covers 1 July 2025 to 30 June 2026, and tax year 2027 - commonly written as 2026-27 - covers 1 July 2026 to 30 June 2027.
Your residency status decides what income Pakistan can tax. Under the Ordinance you are a resident individual if either test below is met:
| Residency test | Condition | What is taxed |
|---|---|---|
| 183-day test | Present in Pakistan for 183 days or more in the tax year | Worldwide (global) income |
| 120-day test | 120 days or more in the year, plus 365 days or more across the four preceding years | Worldwide (global) income |
| Non-resident | Neither test met | Pakistan-source income only |
Even a part-day inside the country counts as a full day, and the days need not be consecutive. This matters most for overseas Pakistanis, whose worldwide income becomes taxable once they cross the resident threshold.
The five heads of income
All income is sorted into one of five statutory heads. How income is classified affects the rate, the allowable deductions and the withholding that applies:
| Head of income | Covers | Explore further |
|---|---|---|
| Salary | Employment income, allowances, perquisites | Salary tax |
| Income from business | Sole traders, AOPs and company profits | Business tax |
| Income from property | Rent from land and buildings | Property tax |
| Capital gains | Gains on disposal of property and securities | Capital gains tax |
| Income from other sources | Interest, dividends, royalties, prizes | Agricultural income |
Note that agricultural income is constitutionally a provincial subject, so it is taxed by the provinces rather than the FBR - a common source of confusion.
Headline rates for 2026-27
Pakistan uses a progressive structure for salaried individuals: only the slice of income inside each band is taxed at that band's rate, not your whole salary. Salary up to PKR 600,000 is exempt, and rates rise to a top marginal rate of 35% on income above PKR 4.1 million, with a 9% surcharge where taxable income exceeds PKR 10 million.
| Annual taxable income (PKR) | Salaried tax |
|---|---|
| Up to 600,000 | 0% - exempt |
| 600,001 - 1,200,000 | 1% of the amount over 600,000 |
| 1,200,001 - 2,200,000 | 6,000 + 11% of the amount over 1,200,000 |
| 2,200,001 - 3,200,000 | 116,000 + 23% of the amount over 2,200,000 |
| 3,200,001 - 4,100,000 | 346,000 + 30% of the amount over 3,200,000 |
| Above 4,100,000 | 616,000 + 35% of the amount over 4,100,000 |
Business individuals, AOPs and companies are taxed under separate rate schedules, and advance tax under section 147 may apply during the year. For the full salaried rate card and worked examples, read our dedicated income tax slabs 2026-27 guide, or get your exact figure from the calculator.
Filing your return: an overview
Returns are filed online through the FBR's IRIS portal. The process, in short:
| Step | What you do |
|---|---|
| 1. Register | Get an NTN and IRIS login (CNIC-based for individuals) |
| 2. Declare income | Enter income under each applicable head plus deductions |
| 3. Reconcile | Claim credit for tax already withheld at source |
| 4. Wealth statement | File the wealth statement reconciling assets year on year |
| 5. Submit & pay | Pay any balance and submit before the deadline |
For salaried individuals and AOPs the return is normally due by 30 September following the tax year, though extensions are sometimes granted. Filing on time is what gets you onto the ATL. Miss it and you may face default surcharge and penalties - see tax penalties. Prefer to hand it off? Our income tax return filing service handles salaried and business returns end to end. For a full walkthrough, see how to file a return in IRIS.
Frequently asked questions
What is income tax in Pakistan?
A federal tax on income earned in a tax year, charged under the Income Tax Ordinance 2001 and collected by the FBR. It covers salary, business, property, capital gains and other income above the exemption threshold.
Who has to pay income tax?
Anyone with taxable Pakistan-source income above the exemption limit - PKR 600,000 a year for salaried individuals. Residents are also taxed on worldwide income; non-residents only on Pakistan-source income.
What is the tax year in Pakistan?
1 July to 30 June. Tax year 2026 is 1 July 2025 to 30 June 2026; tax year 2027 (2026-27) is 1 July 2026 to 30 June 2027.
When am I a tax resident?
If you are in Pakistan for 183 days or more in the tax year, or 120 days or more plus 365 days across the preceding four years. Residents are taxed on global income.
Filer or non-filer - does it matter?
Yes. Filers on the ATL pay lower withholding tax on property, banking and vehicles. Filing even a nil return usually saves money - see our filer vs non-filer guide.
When is the return deadline?
Normally 30 September after the tax year for salaried individuals and AOPs, filed online through IRIS. Extensions are sometimes granted.