Pakistan rewrites its salary tax slabs in almost every June budget, and the Finance Act 2026 was no exception. This guide gives the current slabs for tax year 2026-27 in full, two worked examples, and the surcharge change that many payslips — and many calculators — have not caught up with.
In short: for tax year 2026-27, salary up to Rs 600,000 a year is tax-free. Above that, the Finance Act 2026 charges 1% rising through widening bands to 35% on income above Rs 7,000,000 — and the 9% surcharge that high earners paid last year has been abolished for salaried persons.
You are in the salaried class when salary makes up more than 75% of your taxable income. Your employer withholds your tax monthly under section 149 of the Income Tax Ordinance — in practice, one twelfth of your estimated annual tax comes out of each payslip, and your annual return reconciles the total. The slabs below apply to that annual salary figure, so always convert monthly pay to a yearly amount first (monthly × 12), including taxable allowances and bonuses.
| Annual taxable salary | Tax |
|---|---|
| Up to Rs 600,000 | 0 |
| Rs 600,001 – 1,200,000 | 1% of the amount above Rs 600,000 |
| Rs 1,200,001 – 2,200,000 | Rs 6,000 + 11% of the amount above Rs 1,200,000 |
| Rs 2,200,001 – 3,200,000 | Rs 116,000 + 20% of the amount above Rs 2,200,000 |
| Rs 3,200,001 – 4,100,000 | Rs 316,000 + 25% of the amount above Rs 3,200,000 |
| Rs 4,100,001 – 5,600,000 | Rs 541,000 + 29% of the amount above Rs 4,100,000 |
| Rs 5,600,001 – 7,000,000 | Rs 976,000 + 32% of the amount above Rs 5,600,000 |
| Above Rs 7,000,000 | Rs 1,424,000 + 35% of the amount above Rs 7,000,000 |
Compared with 2025-26, the middle bands were cut — the Rs 2.2–3.2 million band fell from 23% to 20%, the next from 30% to 25% — and two new higher bands (29% and 32%) were added before the 35% top rate, which now starts at Rs 7 million instead of Rs 4.1 million. These slabs have been in force since 1 July 2026.
An effective rate of just 0.5% — at this level the tax-free threshold and the gentle first band do almost all the work.
Under last year's 2025-26 table the same salary paid Rs 300,000 (Rs 25,000 a month), because the band above Rs 2.2 million was taxed at 23% instead of 20%. The Finance Act 2026 therefore saves this employee Rs 24,000 a year. If your payslip still deducts Rs 25,000, your payroll has not updated its table.
In tax year 2025-26, a surcharge under section 4AB added 9% on top of the tax of salaried persons whose taxable income exceeded Rs 10 million — worth Rs 304,290 on a Rs 12 million salary. From tax year 2026-27 that surcharge is abolished for the salaried class: a Rs 12 million salary now pays Rs 3,174,000 flat under the new table, with nothing added. (The surcharge still exists for non-salaried persons, at 10%.) Any calculator that still adds a surcharge to a 2026-27 salary is a year out of date.
If your income is export proceeds for IT or IT-enabled services received in Pakistan through banking channels, the salary slabs do not apply. Section 154A taxes those proceeds as a final tax at 0.25% if you are registered with the Pakistan Software Export Board (PSEB), or 1% if you are not — deducted by the bank when the foreign currency is realised. The Finance Act 2026 extended the 0.25% rate up to tax year 2029. Freelancers earning from local clients, or through non-banking channels, fall under the normal non-salaried rules instead — a different table.
Rs 6,000 a year — Rs 500 a month. The first Rs 600,000 is tax-free and the next Rs 600,000 is charged at only 1%.
Not for salaried persons. The section 4AB surcharge (9% above Rs 10 million in 2025-26) was abolished for the salaried class from 2026-27; it remains for non-salaried persons at 10%.
1 July 2026. Payslips from July 2026 onwards should use the Finance Act 2026 table; the 2025-26 table in our calculator is kept for comparison and for finalising last year's return.
Under section 154A, IT-export proceeds through banking channels are finally taxed at 0.25% (PSEB-registered) or 1% (unregistered) — not under the salary slabs.