DoubleTaxationTaxes on salary: Pakistan
How much tax and social security is paid on a salary in Pakistan, what is left as take-home pay, and which special tax regimes exist.
Calculation for a gross salary of €60,000 per year
| Gross salary | PKR 1,95,95,796 ≈ €60,000 |
|---|---|
| Income tax | |
| Income tax | PKR 58,32,529 ≈ €17,859 |
| Employee contributions | |
| EOBI contribution (insured person) | PKR 4,884 ≈ €15 |
| Take-home pay | PKR 1,37,58,383 ≈ €42,127 |
| Employer contributions and payroll taxes | |
| EOBI contribution (employer) | PKR 24,420 ≈ €75 |
| Employer's labour cost | PKR 1,96,20,216 ≈ €60,075 |
Only some of the country's direct taxes and levies are counted: income tax on wages and compulsory contributions. Not counted: property and real-estate taxes; taxes on dividends, interest and other investment income; inheritance and gift taxes; indirect taxes such as VAT, excise and customs duties.
The rupee–euro rate is derived via the US dollar: the State Bank of Pakistan's official USD/PKR rate of 2 January 2026 (278.6423) × the ECB EUR/USD rate of the same date (1.1721). The ECB does not publish a rupee rate, so euro amounts are approximate; the actual exchange rate may differ.
This country is not covered by OECD Taxing Wages; the calculation is ours, using the same methodology.
Special tax regimes
These regimes are not included in the calculation above: each has its own conditions.
Foreign-source income of short-term resident individuals (section 50, Income Tax Ordinance 2001)
Who: Individuals who are resident solely by reason of employment in Pakistan and are present for no more than three years.
Foreign-source income is exempt; the exemption does not cover income from a business established in Pakistan or foreign-source income brought into or received in Pakistan. Pakistani salary is taxed at the regular scale.
Legal basis: Income Tax Ordinance, 2001, s. 50
Foreign-source income of returning expatriates (section 51, Income Tax Ordinance 2001)
Who: Pakistani citizens who become resident after at least four tax years of non-residence.
Foreign-source income is exempt in the tax year of becoming resident and the following tax year. Separately, salary earned abroad in the year of departure is exempt.
Legal basis: Income Tax Ordinance, 2001, s. 51(1)–(2)
Export of computer software or IT / IT-enabled services (section 154A, Income Tax Ordinance 2001; Division IVA, Part III, First Schedule)
Who: Persons (including freelancers) exporting software, IT or IT-enabled services; the reduced rate applies to those registered with the Pakistan Software Export Board (PSEB).
The bank deducts tax when export proceeds are realised: 0.25% for exporters of software, IT or IT-enabled services registered with and certified by the PSEB (tax years 2024–2029), 1% for other exports of services. The deduction is a final tax if the return (and any required withholding and sales-tax statements) is filed; no foreign tax credit is given. The taxpayer may opt out each year in the return and be taxed under the normal regime.
Legal basis: Income Tax Ordinance, 2001, s. 154A(1)–(3); First Schedule, Part III, Division IVA
Tax on pension (section 149(1A), Income Tax Ordinance 2001; Division I, Part I, First Schedule)
Who: Individuals receiving a pension from a former employer (including government).
Pension from a former employer up to Rs 10 million a year — 0%; above that — 5% of the excess as a final tax. Individuals aged 70 or over pay no tax on pension. Pension falls under the head 'Salary', so the 10% surcharge does not apply. If you keep working for the former employer or its associate, the pension is taxed at the regular salary rates.
Tax residence
When Pakistan treats you as a tax resident
- You were in Pakistan for 183 days or more in the tax year (1 July – 30 June) — under s. 82(a) of the Income Tax Ordinance, 2001 you are a resident individual and Pakistan taxes your worldwide income, including income from India.
- You are a Federal or Provincial Government employee or official of Pakistan posted abroad — under s. 82(c) you are a resident individual for the whole tax year, however few days you spent in Pakistan.
- You are a Pakistani citizen and in the Pakistani tax year you were not present in any other country, India included, for more than 182 days — under s. 82(d) you are a resident individual of Pakistan even with fewer than 183 days there.
- You are a Pakistani citizen and no other country treats you as its resident taxpayer — under s. 82(d) you remain a resident individual of Pakistan even though you spent fewer than 183 days there.
Assumptions
- Calculated with the OECD Taxing Wages methodology: income tax including local taxes plus employee social security; single person without children, tax year 2026, ECB rate of 2 January 2026.
- Tax year 2027 (1 July 2026 – 30 June 2027); salaried scale (clause 2, Division I, Part I, First Schedule, Income Tax Ordinance 2001, as amended by the Finance Act 2026): salary exceeds 75% of taxable income.
- There is no standard deduction or credit for salaried persons; exempt allowances (e.g. medical) depend on the contract and are not applied — the whole gross salary is taxable. The employee is on the Active Taxpayers List.
- The section 4AB surcharge for salaried persons was abolished from 1 July 2026 («no surcharge shall be payable»); the 10% for other persons above Rs 10 million does not apply here.
- EOBI (Employees' Old-Age Benefits Institution) contributions: 1% (insured person) and 5% (employer) of the Islamabad minimum wage — Rs 40,700 a month from 1 July 2026; fixed amounts regardless of salary; treated as social security contributions.
- Islamabad (IESSI) and provincial (PESSI, SESSI) employees' social security covers only workers with wages up to a statutory ceiling; the profile salaries are far above it, so no contribution is included. The Workers' Welfare Fund and Workers' Profit Participation Fund are levied on company profits, not on payroll, and are excluded.
- Local taxes — location: Islamabad (Islamabad Capital Territory)
- Tax period: 2026-07-01 – 2027-06-30
- Exchange rate: 1 EUR = 326.5966 PKR (State Bank of Pakistan USD/PKR × ECB EUR/USD, 02/01/2026)
- The rupee–euro rate is derived via the US dollar: the State Bank of Pakistan's official USD/PKR rate of 2 January 2026 (278.6423) × the ECB EUR/USD rate of the same date (1.1721). The ECB does not publish a rupee rate, so euro amounts are approximate; the actual exchange rate may differ.
Sources
- Finance Act 2026 (Act No. XLIII of 2026, assent 26 June 2026): s. 4AB proviso «no surcharge shall be payable»; First Schedule, Part I, Division I, clause (2) — new salaried table
- FBR Withholding Tax Rate Card for tax year 2027, updated as per Finance Act 2026 (s. 149 salary, s. 149(1A) pension, s. 154A)
- ProPakistani, 12 June 2026 — monthly tax on salary under the 2026-27 slabs (worked examples)
- WageIndicator: Islamabad minimum wage Rs 40,700 per month from 1 July 2026 (notification of 19 August 2026)
- Vialto Partners, Pakistan social security update (28 Oct 2025): EOBI employer 5% / employee 1% of statutory minimum wage
- US SSA, Social Security Programs Throughout the World: Pakistan — old-age financing 1% / 5% of minimum wage; provincial social security wage ceiling
- ARY News, 2 Jan 2026: SBP USD/PKR mark-to-market rate 278.6423
- ECB euro reference exchange rate USD, 2 Jan 2026: 1.1721
Data checked: 01/11/2026. An indicative calculation for a typical case. Not tax advice.