Taxes 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

Income tax
Gross salary	Rs 19,595,796 ≈ €60,000
Income tax	Rs 5,832,529 ≈ €17,859
Employee contributions
EOBI contribution (insured person)	Rs 4,884 ≈ €15
Take-home pay	Rs 13,758,383 ≈ €42,127
Employer contributions and payroll taxes
EOBI contribution (employer)	Rs 24,420 ≈ €75
Employer's labour cost	Rs 19,620,216 ≈ €60,075

29.8 %Tax burden on the employee

29.9 %Tax burden incl. employer contributions

35.0 %Tax burden on each extra EUR 100

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.

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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.

Legal basis: Income Tax Ordinance, 2001, s. 12(2A), s. 4AB proviso (as amended by Finance Act 2026), s. 149(1A); First Schedule, Part I, Division I, clause (2), proviso

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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

Data checked: 01/11/2026. An indicative calculation for a typical case. Not tax advice.

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