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How to Calculate Income Tax on Salary in Pakistan in 2022

Here we are going to discuss everything you should know about the calculation of tax on your salary income according to the latest Salary tax slabs 2021-2022 rates in Pakistan.

DIVISION OF SALARY INCOME IN PAKISTAN

Salary Income is subject to the following divisions as per the general practices and according to the Income Tax Ordinance, 2001. Have a look:

  • Basic Salary
  • House Rent Allowance (HRA)
  • Conveyance Allowance
  • Medical and Other Allowances

BASIC SALARY

It’s a fixed amount of money that you may receive without any extra payments or deductions. It doesn’t include any type of allowances, commissions, bonuses, or overtime pay.

HOUSE RENT ALLOWANCE (HRA)

The House Rent Allowance (HRA) consists of a certain percentage of your gross salary. It is set according to the amount of your take home salary. Usually, a house rent allowance is around 40 to 50 percent of your basic salary. 

CONVEYANCE ALLOWANCE

Around 10-15 percent of the salaries are allocated for conveyance allowances. For example, if you’re earning PKR 50,000 monthly, a conveyance allowance of around PKR 5,000 to 7,000 will be included in this amount.

MEDICAL AND OTHER ALLOWANCES

Many employers, offer separately amount of medical allowance. Same is the case with other types of allowances such as entertainment allowances, travel allowances and fuel allowances.

Salary tax slab rates in Pakistan in 2022

LATEST SALARY INCOME TAX SLAB RATES IN PAKISTAN FOR TAX YEAR 2022

According to the income tax slabs for FY 2021-22, a certain amount of income tax will be deducted from the salaries of individuals earning more than PKR 600,000/- per annum. Previously, this salary slab was not included in the income tax deduction bracket. Now, let’s learn more about the latest tax slab rates in Pakistan for the fiscal year 2021-22

Taxable IncomeIncome Tax Rate in Pakistan
Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,0005% of the amount exceeding Rs. 600,000
Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
Where taxable income exceeds Rs. 75,000,000Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000]

How to Calculate Income Tax on Salary in Pakistan in 2022

Basic salary
Add: Salary Allowances:
  + House Rent Allowance
  + Conveyance Allowance 
  + Medical Allowance 
  + any other allowance
  --------------------------------------
  Gross income from salary =
  (-) Salary Related Deductions:
  --------------------------------------
  Net income / Taxable Income
  (Tax calculated according to the income tax slabs)

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