FBR's income tax slabs for tax year 2026 (1 July 2025 – 30 June 2026) determine what you owe on salary, business income, or other earnings. Salaried individuals, business persons, and AOPs each follow a different slab table, and companies pay a flat corporate rate rather than progressive slabs. Here's the complete breakdown.
Salaried Individuals — Tax Year 2026
| Annual Taxable Income (Rs.) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 5% of amount above Rs. 600,000 |
| 1,200,001 – 2,200,000 | Rs. 30,000 + 15% above Rs. 1,200,000 |
| 2,200,001 – 3,200,000 | Rs. 180,000 + 25% above Rs. 2,200,000 |
| 3,200,001 – 4,100,000 | Rs. 430,000 + 30% above Rs. 3,200,000 |
| Above 4,100,000 | Rs. 700,000 + 35% above Rs. 4,100,000 |
These bands apply to taxable income — after allowable exemptions like medical and conveyance allowance are excluded, not your raw gross salary.
Business Individuals & AOPs — Tax Year 2026
Freelancers, sole proprietors, and Associations of Persons follow a steeper schedule:
| Annual Taxable Income (Rs.) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 15% of amount above Rs. 600,000 |
| 1,200,001 – 1,600,000 | Rs. 90,000 + 20% above Rs. 1,200,000 |
| 1,600,001 – 3,200,000 | Rs. 170,000 + 30% above Rs. 1,600,000 |
| 3,200,001 – 5,600,000 | Rs. 650,000 + 40% above Rs. 3,200,000 |
| Above 5,600,000 | Rs. 1,610,000 + 45% above Rs. 5,600,000 |
Corporate Rates — Tax Year 2026
| Entity Type | Tax Rate |
|---|---|
| Private/Public Limited Company | 29% |
| Small Company (turnover under Rs. 250M) | 20% |
| Banking Company | 39% |
Worked Example — Salaried, Rs. 2.5M Annual Income
Gross salary: Rs. 2,500,000. Less medical allowance (10% of basic, Rs. 100,000) leaves taxable income of Rs. 2,400,000. Tax on the first Rs. 2,200,000 is a fixed Rs. 180,000; the remaining Rs. 200,000 is taxed at 25% = Rs. 50,000. Total tax liability: Rs. 230,000 — an effective rate of just 9.2%, since only the top slice of income is taxed at the marginal 25% rate.
Income That Isn't Taxable at All
- Agricultural income (exempt under provincial laws)
- Approved gratuity fund payouts, up to prescribed limits
- Provident fund contributions and withdrawals (approved funds)
- Scholarships and education grants
- Approved pension fund income
Legal Deductions and Credits Worth Knowing
| Deduction/Credit | Limit |
|---|---|
| Pension fund contribution (Sec. 63) | 20–40% of taxable income (age-based) |
| Listed shares / equity fund investment (Sec. 62) | Tax credit on up to Rs. 1.5M invested |
| Donations to approved institutions (Sec. 61) | Up to 30% of taxable income |
| Medical allowance | Up to 10% of basic salary, exempt |