Overview of Salary Taxation under Finance Act 2024
The Finance Act 2024 significantly restructured the individual income tax rate schedule for salaried taxpayers in Pakistan for Tax Year 2025 (covering salaries earned between 1 July 2024 and 30 June 2025). An individual qualifies as a salaried person when employment income constitutes more than 75% of their total taxable income for the year under Section 12.
Statutory Salary Tax Slabs (Tax Year 2025)
- Up to PKR 600,000: 0% (Exempt threshold).
- PKR 600,001 to PKR 1,200,000: 5% of the amount exceeding PKR 600,000.
- PKR 1,200,001 to PKR 2,200,000: PKR 30,000 + 15% of the amount exceeding PKR 1,200,000.
- PKR 2,200,001 to PKR 3,200,000: PKR 180,000 + 25% of the amount exceeding PKR 2,200,000.
- PKR 3,200,001 to PKR 4,100,000: PKR 430,000 + 30% of the amount exceeding PKR 3,200,000.
- Exceeding PKR 4,100,000: PKR 700,000 + 35% of the amount exceeding PKR 4,100,000.
In addition, an across-the-board 10% surcharge applies to taxable income exceeding PKR 10 Million under the newly inserted provisions of the Finance Act 2024.
Statutory Withholding Obligations under Section 149
Every employer is mandated by law to deduct monthly income tax at the average rate calculated on estimated annual taxable salary. Employers must remit these deductions under Section 160 within statutory deadlines and submit monthly withholding statements under Section 165.
Allowable Deductions, Rebates & Wealth Reconciliation
Salaried individuals can lawfully optimize their final tax liabilities through admissible statutory provisions:
- Medical Allowance: Exempt up to 10% of basic salary if hospitalization is not independently reimbursed by the employer (Clause 139, Part I, Second Schedule).
- Zakat Deductions: Fully deductible from total income under Section 60 when paid under the Zakat and Ushr Ordinance, 1980.
- Section 116 Wealth Reconciliation: All salaried filers must reconcile gross annual earnings against personal bank accretions, household expenditure, and property acquisitions.