In Pakistan, the income tax rates for individuals are determined based on the amount of income earned and are progressive in nature. The tax year in Pakistan runs from July 1 to June 30.
Pakistan-source income is defined in Section 101 of the Income Tax Ordinance, 2001, which caters to incomes under different heads and situations. Some of the common Pakistan-source incomes are as under:
• Salary received or receivable from any employment exercised in Pakistan wherever paid;
• Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;
• Dividend paid by a resident company;
• Profit on debt paid by a resident person;
• Property or rental income from the lease of immovable property in Pakistan;
• Pension or annuity paid or payable by a resident or permanent establishment of a non-resident.
In the Federal Budget 2024–25, the government of Pakistan has retained and adjusted the income tax rates for salaried individuals as follows:
Salaried Individuals (Tax Year 2025):
• For income up to Rs. 600,000, the tax rate is 0%
• For income between Rs. 600,001 and Rs. 1,200,000, the tax rate is 2.5% of the amount exceeding Rs. 600,000
• For income between Rs. 1,200,001 and Rs. 2,400,000, the tax rate is 15% of the amount exceeding Rs. 1,200,000 + Rs. 15,000
• For income between Rs. 2,400,001 and Rs. 3,600,000, the tax rate is 20% of the amount exceeding Rs. 2,400,000 + Rs. 195,000
• For income between Rs. 3,600,001 and Rs. 6,000,000, the tax rate is 25% of the amount exceeding Rs. 3,600,000 + Rs. 435,000
• For income between Rs. 6,000,001 and Rs. 12,000,000, the tax rate is 32.5% of the amount exceeding Rs. 6,000,000 + Rs. 1,035,000
• For income above Rs. 12,000,000, the tax rate is 35% of the amount exceeding Rs. 12,000,000 + Rs. 3,975,000
These rates are applicable to salaried individuals only. For non-salaried individuals, slightly different slabs apply.
Corporate and Business Tax Rates (2024–25):
• Companies (other than banking companies): 29%
• Banking companies: 39%
• Small companies (as defined under Section 2(59A)): 20%
• Associations of Persons (AOPs): Variable rates, subject to final taxation in certain cases.
It’s worth noting that several exemptions and deductions are still available under the Ordinance. These include deductions for:
• Investments in approved pension funds (under VPS Rules)
• Zakat payments
• Charitable donations under Section 61
• Tax credits for health insurance, education, and solar panels
These exemptions can significantly reduce the effective tax liability for compliant taxpayers.
As always, these rates and reliefs are subject to change and it’s recommended to consult with a qualified tax advisor or verify from the Federal Board of Revenue (FBR) for the most recent and applicable updates.
Overall, the income tax structure in Pakistan aims to be progressive and supportive, especially for lower- and middle-income earners, while ensuring revenue generation from high-income groups and corporations.
