For most salaried people, income tax is just a number that disappears from the payslip every month. But there's more going on behind that deduction — how your employer calculates it, which allowances are exempt, and why you still need to file a return even after tax has already been withheld. Here's what every salaried employee in Pakistan should know for tax year 2026.
Who Counts as a "Salaried Person"
FBR classifies you as a salaried person when salary makes up more than 75% of your total taxable income for the year — not based on your job title. This matters because salaried individuals get a more favourable rate schedule than business owners. Salary itself is defined broadly: basic pay, allowances, bonuses, commissions tied to employment, overtime, and even non-cash perks like employer-provided housing or a company car are all captured. If your salary share drops below 75% in a given year — say, from a large property sale or freelance income — you could be reclassified and taxed less favourably for that year.
Salary Tax Slabs for 2026
Tax applies progressively — each slab rate only touches the portion of income within that band, not your entire salary:
| Annual Taxable Salary | Tax |
|---|---|
| Up to Rs. 600,000 | 0% |
| Rs. 600,001 – 1,200,000 | 5% of amount above Rs. 600,000 |
| Rs. 1,200,001 – 2,200,000 | Rs. 30,000 + 15% above Rs. 1,200,000 |
| Rs. 2,200,001 – 3,200,000 | Rs. 180,000 + 25% above Rs. 2,200,000 |
| Rs. 3,200,001 – 4,100,000 | Rs. 430,000 + 30% above Rs. 3,200,000 |
| Above Rs. 4,100,000 | Rs. 700,000 + 35% above Rs. 4,100,000 |
Example: A monthly salary of Rs. 100,000 (Rs. 1.2M annually) falls just at the second slab boundary — tax works out to 5% of Rs. 600,000 = Rs. 30,000 a year, or Rs. 2,500 deducted monthly by the employer under Section 149.
Allowances That Escape Tax
- Medical allowance — exempt up to 10% of basic salary (or the full reimbursed amount if it's against actual bills)
- Conveyance allowance — exempt up to Rs. 5,000/month; anything above that is taxable
- Approved gratuity — fully exempt if paid from an FBR-approved gratuity fund
- Provident fund — contributions and the profit credited to an approved fund are not taxed as current income
Check your payslip against these rules — it's common for employers to tax the full medical or conveyance allowance instead of applying the exemption correctly.
What's Fully Taxable
Bonuses, performance pay, employment-linked commissions, utility and entertainment allowances, the value of employer-provided accommodation or a car used personally, and ESOPs (taxed at vesting, not at grant) are all fully taxable in the year received.
Filing Your Return on IRIS
- Log in to iris.fbr.gov.pk with your NTN/CNIC and password
- Open the Income Tax Return for the correct tax year
- Enter your salary figures from your employer's annual salary certificate
- Verify the WHT credit matches what was actually deducted
- Complete the wealth statement (assets and liabilities as of 30 June)
- Submit and save your acknowledgment receipt
The filing deadline is 30 September every year. Miss it and you drop off the Active Taxpayer List, face higher withholding on banking and property transactions, and get hit with a daily late-filing penalty — even a nil return is worth filing on time.
Claiming a Refund
If your employer over-deducted WHT during the year — common when someone changes jobs mid-year or gets an unexpected bonus — the excess shows up as a refund once you file. Refunds are typically processed within 45 to 60 days; track status under Refund → Refund Status on IRIS.
Mistakes to Avoid
- Assuming employer WHT means you don't need to file — it doesn't; the return is still mandatory
- Leaving out bank profit income just because the bank already deducted WHT on it
- Letting your wealth statement drift out of sync with your declared income, which invites a Section 111 notice
- Filing late and losing ATL status in the process