# Salary Taxation in Pakistan in tax year 2023
If you are a salaried person in Pakistan, you may be wondering how much tax you have to pay on your income in the tax year 2023. In this blog post, we will explain the basic concepts and rules of salary taxation in Pakistan, and provide some examples to help you calculate your tax liability.
## What is salary income?
According to the Income Tax Ordinance 2001, salary income includes any amount received by an employee from an employer in cash or in kind, such as:
– Basic salary, wages, leave pay, fee, commission, bonus, gratuity, perquisite or allowance
– Annuity, pension or superannuation
– Profit in lieu of or in addition to salary
– Advance salary
– Any amount received under a contract of service
– Any amount received as compensation for termination of service
Salary income does not include:
– Any amount exempt from tax under the Income Tax Ordinance 2001 or any other law
– Any amount received as a share of profit from an association of persons (AOP)
– Any amount received as a dividend from a company
– Any amount received as interest on securities or loans
## Who is liable to pay tax on salary income?
Tax on salary income is levied on the basis of residency status. A resident individual is taxed on his or her worldwide income, whereas a non-resident individual is taxed only on Pakistan-source income.
An individual is considered a resident for tax purposes if he or she:
– Is present in Pakistan for 183 days or more in a tax year
– Is an employee or official of the federal or provincial government posted abroad at any time in a tax year
– Is a citizen of Pakistan who is working abroad for a resident company and whose income is taxable in Pakistan
Salary income is considered Pakistan source income to the extent to which it relates to employment exercised in Pakistan, wherever paid.
## How is tax on salary income calculated?
Tax on salary income is calculated by applying the relevant tax rates to the taxable income. Taxable income is the gross income minus any deductions or exemptions allowed under the Income Tax Ordinance 2001.
The deductions allowed from salary income include:
– Any contribution made by the employee to an approved pension fund, provident fund, superannuation fund or gratuity fund
– Any amount paid by the employee as zakat or donation to an approved institution or fund
– Any amount paid by the employee as premium for life insurance or health insurance
– Any amount paid by the employee as fee for professional education of his or her children
– Any amount paid by the employee as interest on loan for house construction or purchase
The exemptions allowed from salary income include:
– Any allowance for academic research or training
– Any allowance for conveyance or travel
– Any allowance for entertainment or representation
– Any allowance for utilities such as electricity, gas and water
– Any allowance for medical expenses or treatment
– Any allowance for special pay, hardship pay or risk pay
– Any allowance for cost of living adjustment (COLA)
– Any allowance for house rent up to 45% of salary or actual rent paid, whichever is lower
– Any gratuity received on retirement or death up to Rs. 500,000 or average annual salary for last three years, whichever is higher
– Any commutation of pension received on retirement or death up to 50% of the pension amount
– Any compensation received for loss of employment up to Rs. 500,000
The tax rates applicable for salaried persons for the tax year 2023 are as follows:
| Taxable income (PKR) | Tax on column 1 (PKR) | Tax on excess (%) |
| Over | Not over | |
| 0 | 600,000 | 0 |
| 600,000 | 1,200,000 | 2.5 |
| 1,200,000 | 2,400,000 | 15,000 + 12.5 |
| 2,400,000 | 3,600,000 | 165,000 + 20 |
| 3,600,000 | 6,000,000 | 405,000 + 25 |
| 6,000,000 | 12,000,000 | 1,005,000 + 32.5 |
| 12,000,000 | – | 2,9550 +35 |