How FBR Calculates Salary Tax in Pakistan 2025-26 (Step-by-Step)

Your monthly salary tax deduction is not random — it follows a specific formula prescribed by FBR. Understanding it helps you verify your payslip and plan finances.

Step 1: Calculate annual taxable income

Multiply your monthly gross salary × 12. Subtract exempt allowances: medical (up to 10% of basic), gratuity within prescribed limits, and approved provident fund contributions.

Step 2: Apply progressive slabs

Each portion of income falls into a specific bracket. The first PKR 600k is tax-free. Above that, each slab is taxed at its rate. Tax is the SUM across slabs, not just your top rate × total.

Step 3: Apply surcharge if applicable

If annual income exceeds PKR 10 million, add 9% surcharge on the calculated base tax (FY 2025-26 rate for salaried).

Step 4: Divide by 12 for monthly deduction

Your employer deducts the annual tax divided by 12 each month under Section 149 (Withholding Tax on Salaries). Year-end true-up adjusts for any over/underpayment.

Frequently asked questions

Why does my payslip show different tax than your calculator?

Common reasons: your employer may use averaged tax over remaining months (especially for new joiners), may include or exclude bonuses differently, or may not deduct exempt allowances. Use our calculator with your gross salary and compare to the annual figure on your tax certificate (form 24).