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Pakistan
Individual - Taxes on personal income
Last reviewed - 17 January 2023Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan. Salary is considered Pakistan source income to the extent to which it relates to employment exercised in Pakistan, wherever paid.
Personal income tax rates
The following tax rates apply where income of the individual from salary exceeds 75% of taxable income:
| Taxable income (PKR) | Tax on column 1 (PKR) | Tax on excess (%) | |
| Over (column 1) | Not over | ||
| 0 | 600,000 | 0 | |
| 600,000 | 1,200,000 | 2.5 | |
| 1,200,000 | 2,400,000 | 15,000 | 12.5 |
| 2,400,000 | 3,600,000 | 165,000 | 20 |
| 3,600,000 | 6,000,000 | 405,000 | 25 |
| 6,000,000 | 12,000,000 | 1,005,000 | 32.5 |
| 12,000,000 | 2,955,000 | 35 | |
The following tax rates are applicable in other cases (for individuals and AOPs):
| Taxable income (PKR) | Tax on column 1 (PKR) | Tax on excess (%) | |
| Over (column 1) | Not over | ||
| 0 | 600,000 | 0 | |
| 600,000 | 800,000 | 5 | |
| 800,000 | 1,200,000 | 10,000 | 12.5 |
| 1,200,000 | 2,400,000 | 60,000 | 17.5 |
| 2,400,000 | 3,000,000 | 270,000 | 22.5 |
| 3,000,000 | 4,000,000 | 405,000 | 27.5 |
| 4,000,000 | 6,000,000 | 680,000 | 32.5 |
| 6,000,000 | 1,330,000 | 35 | |
Withholding requirements
In general, entire tax is deducted at source on payment of salary to individuals at rates mentioned above for salaried individuals. Varying withholding tax rates are prescribed for different goods, services and contracts provided and executed by individuals and AOP, based on status of the vendor being an active taxpayer or not.
Payments made on account of dividend, interest, royalty, and fee for technical services income derived from Pakistan sources are generally subject to a 15% WHT, which tax has to be withheld/deducted from the gross amount paid to the recipient. The majority of these payments do not attract enhancement of 100% even if the recipients are not appearing on the Active Taxpayers List (ATL).
Local taxes on income
The only significant tax on salaries is federal income tax.
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Tax Partner, PwC Pakistan
Tax Partner, PwC Pakistan