How to Calculate Income Tax on Salary in Pakistan in 2022

Income tax is a direct type of tax that all governments levy on the incomes generated by working citizens and businesses. Pakistan’s current Taxation System is defined by the Income Tax Ordinance 2001 for direct taxes and administered by the Federal Board of Revenue (FBR). This Ordinance mandates the collection of this tax by the central government. The government holds the autonomy to change the income slabs and tax rates every year in its Annual Budget. The period from 1st July to 30th June is considered the normal fiscal year for Pakistan’s tax law purposes. If you’re wondering how to calculate income tax on salary in Pakistan, we have got you covered.

Income taxes provide revenue to the government for funding public services, paying government obligations, and providing goods for citizens. Income isn’t only the money earned as a salary. It also includes rents from personal assets like houses or shops, profits from businesses, bonuses, capital gains income, and ‘income from other sources’. Today, the Corporate Income Tax rate is 29% since 2019 whereas the corporate tax rate is 35% for the Banking Industry. There are other applicable income taxes as well, including the Super Tax, the Minimum Tax, and the Tax on Undistributed Reserves.

According to the Income Tax Ordinance 2001, the salary you take home each year is subjected to the following divisions:

• Basic Salary
• House Rent Allowance (HRA)
• Conveyance Allowance
• Medical and Other Allowances

How To Calculate Income Tax on Salary in 2022

• Online Method

1. Go to Income Tax Calculator
2. Enter your income
3. Click whether you want to enter monthly or annual income
4. Hit ‘Calculate’
5. Results will be shown below along with applicable tax, salary after tax, exempted amount, and the tax slab that you fall under.

• Income Tax Slabs

As per the income tax slabs for FY 2021-22, a certain amount will be deducted from the salaries of individuals earning more than Rs. 600,000/- per annum.

Here’s all you need to know about tax slabs for FY2021-22:

Taxable Income	Income Tax Rate in Pakistan
Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000	5% of the amount exceeding Rs. 600,000
Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000	Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000	Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000	Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000	Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000	Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000	Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000	Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000	Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000	Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
Where taxable income exceeds Rs. 75,000,000	Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000