Basics of Income Tax Rates in Pakistan

Taxable Income means total income minus qualifying donations and certain deductible allowances.
Total Income means the sum of the income taxable under each head of income.
Income is categorized into five heads broadly under the Income Tax Ordinance, 2001:
Salary
Income from Property
Income from Business or Profession
Capital Gains
Income from Other Sources
Association of Persons (AOP), a Company, and an Individual are treated as non-resident for a tax year if they are not resident for the year.
Normal Tax Year in Pakistan is a 12-month period ending on June 30, represented by the calendar year in which the period ends. For instance, July 1, 2017 to June 30, 2018 is tax year 2018.
A Special Tax Year is any 12-month period that is different from the regular tax year, but it still ends in the same calendar year as the regular tax year.

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Overview of Different Income Tax Rates in Pakistan

Following is a comprehensive overview of different income tax rates applicable in Pakistan for the financial year 2024-2025: You can also use the Income Tax Pakistan calculator to calculate it.

Income Tax Rates in Pakistan for Salaried Individuals

Income tax rate on salary up to Rs. 600,000: 0% tax (free)
Rs. 600,001 to Rs. 1,200,000: 5% of the amount over Rs. 600,000
Rs. 1,200,001 to Rs. 2,200,000: Rs. 30,000 + 15% of amount over Rs. 1,200,000
Rs. 2,200,001 to Rs. 3,200,000: Rs. 180,000 + 25% of amount over Rs. 2,200,000
Rs. 3,200,001 to Rs. 4,100,000: Rs. 430,000 + 30% of amount over Rs. 3,200,000
Over Rs. 4,100,000: Rs. 700,000 + 35% of amount over Rs. 4,100,000

These rates capture the rise in tax burden as announced in the 2024-25 budget, with increased rates particularly impacting those earning over Rs. 600,000 per annum.

Income Tax Rate on Rental Income

Rental income up to Rs. 300,000 is tax-free.
Rs. 300,001 to Rs. 600,000: 5% on the amount in excess of Rs. 300,000
Rs. 600,001 to Rs. 2,000,000: Rs. 15,000 + 10% on amount in excess of Rs. 600,000
Over Rs. 2,000,000: Rs. 155,000 + 25% on amount in excess of Rs. 2,000,000

Income Tax Rates for Companies

Company Type	Tax Rate
Banking Companies	39%
Income Tax Rate for PVT Limited Company/ Public LTD Companies	29%
Small Companies	20%
Modaraba	25%
Alternate Corporate Tax (ACT)	17% of accounting profit

Also, there is a super tax on high-income companies and individuals with income levels above Rs. 150 million, which varies from 1% to 10% based on income level and sector.

You can consider the same table for the income tax rate for government employees in Pakistan.

Income Tax on Prize Bond Winnings

For filers: 15% withholding tax at source on prize money
For non-filers: 30% withholding tax
Total income tax on prize bond winnings varies between 5% and 35%, depending on the tax bracket of the individual.

Income Tax on Contractors and Services

Here are the income tax rates on services in pakistan

Builders and developers are taxed on their earnings from specific activities, as specified below:

10% tax on earnings from building and selling buildings for residence, business, or other types of buildings, based on gross receipts.
15% on profits obtained from developing and selling residential, commercial, or other plots based on gross receipts.
12% of total income obtained from both construction and development work, based on gross receipts.

If a taxpayer makes use of income derived from such activities to justify their expenses or investments, they can only claim credit for not more than the taxable profits of such activities.

If their real income is more than these profits, they are still entitled to claim the difference, but at ordinary rates of tax.

Builders or developers formed through government legislation or directives, engaged in activities for employees or the development of public housing, are exempt from this regime of taxation.

FBR Income Tax Exemption List

Category	Exemption Details
Salaried Individuals	Income up to Rs. 600,000 exempt
Diplomats & UN Officials	Income exempt under diplomatic privileges
Foreign Government Employees	Salaries exempt if reciprocal exemption applies
Tax Treaty Income	Income exempt as per international tax treaties
Presidential Awards	Allowances and monetary awards exempt
Governments (Federal/Provincial)	Exempt from tax collection at source
Aga Khan Development Network	Exempt from withholding tax on imports
Exporters & Manufacturing Bonds	Exempt from withholding tax on imports
Contractors on Govt. Power Projects	Exempt from withholding

Wrapping Up

This overview includes the income tax rates in Pakistan for individuals (salaried and rental income), companies, and prize bond winnings for the financial year 2024-2025.

For precise calculations or special cases such as contractors, government servants, partnership firms, it is advisable to refer to the Income Tax Ordinance or a tax consultant in Pakistan.

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