Tax in Pakistan
Pakistan's tax system runs on five main levers — personal income tax, corporate tax, sales tax (GST), federal excise duty and customs duty — all set or amended through an annual federal budget that is frequently revised mid-year by a "mini-budget." Layered on top is a filer-status system that now has three tiers, not two, and a set of mandatory payroll deductions that vary by province. The gap between what the law requires and what actually gets collected is, by any measure, enormous.
Filer, late-filer or non-filer — which tier are you in?
Since the Finance Act reforms of 2024–2025, Pakistan's withholding tax system no longer treats taxpayers as simply "filer" or "non-filer." A third tier — the late filer — sits in between, capturing people who file their return after the deadline and pay an Active Taxpayer List (ATL) surcharge. Your tier decides the withholding tax rate deducted at source on property purchases, bank profit, vehicle registration, and dozens of other transactions.
Active Filer
On the ATL, return filed on time.
Property purchase (≤Rs 50m): 3%
Bank profit: 15%
Cash withdrawal: 0%
Late Filer
Filed after the deadline, ATL surcharge paid.
Property purchase (≤Rs 50m): 6%
Bank profit: between filer & non-filer rates
Cash withdrawal: reduced rate
Non-Filer
Never filed, or not on the ATL at all.
Property purchase (≤Rs 50m): 10%
Bank profit: 35%
Cash withdrawal >Rs 50,000: 0.6%
Illustrative rates for tax year 2025 under sections 236C (property) and standard bank-profit withholding; exact rates vary by transaction type and value band. Not tax advice.
Tax types at a glance
| Tax | Rate (2025–26) | Collected by |
|---|---|---|
| Personal income tax | 0–35%, six slabs | FBR (federal) |
| Corporate tax | 29% (39% banks) | FBR (federal) |
| Super tax (high earners) | up to 10% extra | FBR (federal) |
| Sales tax / GST (goods) | 18% standard | FBR (federal) |
| Sales tax on services | 15–16% | PRA / SRB / KPRA / BRA (provincial) |
| Federal excise duty | Varies by item | FBR (federal) |
| Customs duty | Tariff-slab based | FBR / Pakistan Customs |
Indicative summary only, not tax advice. Rates change with every Finance Act and sometimes mid-year.
Personal income tax
Salaried individuals are taxed on six slabs under the Finance Act 2025, effective 1 July 2025:
| Taxable annual salary | Tax |
|---|---|
| Up to Rs 600,000 | 0% |
| Rs 600,000 – 1,200,000 | 1% of the amount over Rs 600,000 |
| Rs 1,200,000 – 2,200,000 | Rs 6,000 + 11% of the amount over Rs 1,200,000 |
| Rs 2,200,000 – 3,200,000 | Rs 116,000 + 23% of the amount over Rs 2,200,000 |
| Rs 3,200,000 – 4,100,000 | Rs 346,000 + 30% of the amount over Rs 3,200,000 |
| Above Rs 4,100,000 | Rs 616,000 + 35% of the amount over Rs 4,100,000 |
The National Assembly's Standing Committee on Finance cut the rate on the Rs 600,000–1,200,000 slab from 2.5% to 1% shortly before the FY2025–26 budget passed — a reminder that slabs can move even between the budget speech and the final Finance Act.
Corporate tax and super tax
The standard corporate tax rate is 29% for public and private companies, rising to 39% for banking companies. On top of that, a super tax under Section 4C applies on a sliding scale to companies with income above Rs 150 million, reaching 4–10% for companies earning over Rs 500 million — hitting banking, petroleum and large manufacturing hardest. The Finance Act 2025 trimmed super tax rates by 0.5 percentage points for income between Rs 250 million and Rs 500 million.
Sales tax (GST)
The federal General Sales Tax on goods is 18%, collected by the FBR. Sales tax on services is a provincial subject: 15% in Islamabad, Sindh, Balochistan and Khyber Pakhtunkhwa, but 16% in Punjab — collected respectively by the ICT, SRB, BRA, KPRA and PRA rather than the FBR.
Federal excise duty and customs
Federal excise duty is a narrower, targeted tax applied mainly to cigarettes, beverages, cement and a handful of other goods and services, with rates set item-by-item in the Federal Excise Act. Customs duty is charged on imports according to tariff slabs set out in the Pakistan Customs Tariff, with the government's National Tariff Policy periodically adjusting slabs to protect local industry or ease input costs.
The budget cycle: how budgets and mini-budgets move your tax bill
Pakistan's federal budget is normally presented in the National Assembly in June each year for the fiscal year starting 1 July. The FY2025–26 budget was presented on 10 June 2025 by Finance Minister Muhammad Aurangzeb, against the backdrop of an active IMF Extended Fund Facility programme, and its measures (including the salary-slab and super-tax changes above) took effect from 1 July 2025.
Because Pakistan's budgets are negotiated alongside IMF reviews, they rarely stay untouched for a full year. A "mini-budget" — a supplementary finance bill that raises rates or withdraws exemptions outside the normal June cycle — has become a recurring feature whenever revenue collection falls short of the IMF-agreed target. During the May 2026 IMF staff visit, the Fund assessed that Pakistan's proposed measures to raise an additional Rs 430 billion were insufficient, and Islamabad had already agreed that a mini-budget would follow if revenue continued to miss target by end-December 2025. In practice, this means the tax rates on this page can change between budgets, not just at them — always check the current Finance Act or a mini-budget notification before relying on a specific figure.
Payroll deductions: EOBI, PESSI and the provinces
Beyond income tax withheld at source, most formal-sector employees have two further deductions taken from payroll:
EOBI (Employees' Old-Age Benefits Institution) is the federal old-age pension scheme: employers contribute 5% and employees 1% of minimum wage. The minimum EOBI pension rose from Rs 10,000 to Rs 11,500 a month from 1 January 2025, with a 15% top-up for pensioners already receiving more, arrears paid from September 2025.
PESSI (Punjab Employees' Social Security Institution) is Punjab's employer-funded health and sickness-benefit scheme, separate from EOBI — it funds medical care, sickness allowance and maternity benefits for covered workers and their dependents, at a typical employer-only contribution of around 6% of minimum wage (employees contribute nothing). Sindh (SESSI), Khyber Pakhtunkhwa (KPESSI) and Balochistan (BESSI) run parallel provincial schemes covering the same ground in their own jurisdictions. Because EOBI (pension) and the provincial ESSIs (health) cover different risks, most registered employers must contribute to both, not one or the other.
Tax evasion as a pandemic
Pakistan's tax-to-GDP ratio reached 10.6% in FY2025, up 1.5 percentage points on the year before but still far short of the government's IMF-linked 13% target. Behind that gap sits a genuinely enormous evasion and informality problem: estimates range from Rs 956 billion a year lost specifically to evasion and illicit trade in tobacco, sugar and cement, up to figures of Rs 6–10 trillion a year cited by tax officials (including a former FBR chairman) for fraud, evasion and malpractice economy-wide. Pakistan's informal economy is estimated at roughly 60% of GDP — a scale that has led commentators to describe evasion less as a policy problem than a systemic, self-reinforcing condition: the number of registered filers grew from 4.5 million (FY2024) to over 7.2 million (June 2025), yet a rising share of those filers report nil income or losses, meaning registration is growing faster than actual tax paid.
References
FBR — Finance Bill 2025–26 · FBR — Filer and Non-Filer · FBR — Withholding Tax Rate Cards · EOBI — official site · PIDE — Pakistan's Tax System · IMF — Pakistan country page
This page is general information, not tax advice, and not a substitute for advice on your specific situation. Pakistani tax law changes with every Finance Act and often mid-year via supplementary finance bills — always confirm the current position with FBR or a qualified professional and contact us before acting. ← Back to Tax overview