House Rent Allowance (HRA) Tax in Pakistan 2025-26 — Salaried Guide
Last reviewed by Zohaib Nasir, registered tax practitioner
Many Pakistani employees mistakenly believe HRA is tax-exempt (a confusion stemming from Indian tax law). In Pakistan, HRA is fully taxable as part of salary income.
HRA in Pakistan vs India
Indian tax law (Section 10(13A)) provides partial HRA exemption based on rent paid and city. Pakistan's Income Tax Ordinance does not have an equivalent provision. Whatever housing allowance you receive is added to taxable salary in full.
Company-leased accommodation
If your employer leases a house for your use (instead of paying you HRA), the rental value is added to your salary as a perquisite. The valuation is the lesser of actual rent or 45% of basic salary. This is generally less tax-efficient than receiving HRA in cash.
Practical implications
When negotiating compensation, focus on Basic + Medical + Conveyance optimization rather than HRA. Medical allowance up to 10% of basic is exempt; conveyance has no specific exemption but can be reimbursed as actual expense.