Income Tax in Pakistan 2025 : Ultimate Guide + Top 20 Insights

What is Income Tax?

Income Tax in Pakistan 2025 is a direct tax levied by the Federal Board of Revenue (FBR) on individuals, businesses, and other entities based on their income earned during a fiscal year. In Pakistan, the income tax system is progressive, meaning the higher your income, the higher your tax rate.

The purpose of income tax is to:

• Fund public services (education, infrastructure, defense)
• Maintain government institutions
• Reduce income inequality

Who is Liable to Pay Income Tax in Pakistan?

According to FBR guidelines, the following are required to pay income tax:

• Salaried individuals earning above the tax exemption threshold
• Business owners
• Freelancers
• Companies
• Associations of Persons (AOPs)
• Non-residents earning Pakistan-source income

If your annual income exceeds the prescribed limit, you’re required to register and file your tax return.

Income Tax Slabs in Pakistan for 2025

Here’s a simplified breakdown of the proposed income tax slabs for salaried individuals in 2025:

Note: These figures are updated according to the Finance Bill 2025.

How to Calculate Your Income Tax

To calculate your tax:

1. Determine gross income
2. Subtract allowable deductions
3. Apply your income slab’s tax rate

Example:

If your annual salary is PKR 1,500,000:

• First PKR 600,000 = 0%
• Next PKR 600,000 = 5% = 30,000
• Remaining PKR 300,000 = 10% = 30,000
  Total Tax Payable = PKR 60,000

You can also use the official FBR Tax Calculator for exact estimates.

Taxable vs. Non-Taxable Income

Taxable Income Includes:

• Salaries
• Business profits
• Rental income
• Capital gains
• Bank interest (above a certain limit)

Non-Taxable Income Includes:

• Zakat
• Agricultural income (under provincial domain)
• Scholarships
• Pension (under certain limits)

Income Tax Deadlines for 2025

Stay informed of important FBR deadlines:

Late filing can result in penalties up to PKR 50,000 or even legal consequences.

FBR Online Tax Filing System

Filing your income tax is now 100% online using:

• IRIS portal: https://iris.fbr.gov.pk
• Tax Asaan App: Available on Android/iOS
• Third-party consultants (for a fee)

Steps:

1. Create FBR account
2. Enter income details
3. Attach supporting documents
4. Submit and pay the due tax

Withholding Tax Explained

Withholding tax is deducted at source when certain transactions are made. Examples:

• Mobile phone top-ups
• Bank transactions
• Property purchases
• Dividend payments

If you are a filer, your withholding tax rate is generally lower than that of non-filers.

Common Income Tax Deductions

You can reduce your taxable income by declaring:

• Zakat contributions
• Provident fund contributions
• Education expenses
• Medical bills (limited cases)
• Donations to registered charities

Make sure to keep receipts and evidence for all deductions.

Tax Refunds: How to Claim

If you paid more tax than required, you’re eligible for a refund.

Steps to claim:

1. File a return with a bank statement
2. Indicate the excess deduction
3. FBR verification
4. Refund processed to your bank account

Average refund processing time: 3–6 months

Penalties for Non-Filing or Late Filing

Failing to file taxes can result in:

• Fine of PKR 1,000 per day
• Disqualification from prize bonds, car registration, and more
• Legal notice or audit

Always file returns, even if no tax is due, to avoid penalties and maintain filer status.

Income Tax for Salaried Individuals

Employees should:

• Check the monthly salary slip
• Confirm if tax is deducted at source
• File an annual return even if the employer has deducted tax

Pro Tip: Salaried individuals often overlook allowable deductions, such as charitable contributions and insurance premiums.

Income Tax for Freelancers & Online Workers

Freelancers earning from platforms like Upwork, Fiverr, YouTube, or remote jobs:

• Must declare foreign income
• Are eligible for foreign remittance exemptions under certain limits
• Must maintain bank receipts or Payoneer reports

Failure to declare can lead to sudden audits or account freezes.

Income Tax for Businesses & Companies

Whether you’re running a sole proprietorship or Pvt. Ltd., you’re liable for tax:

Registered companies must also file:

• Sales Tax
• Annual Audit Report
• Employee Income Tax Deductions

How to Register with FBR

Registration is free and simple:

1. Visit https://iris.fbr.gov.pk
2. Click on “Registration for Unregistered Person”
3. Provide:
   • CNIC
   • Phone & email (linked to CNIC)
   • Business details (if applicable)

After verification, you’ll receive your NTN (National Tax Number).

Role of NTN and STRN in Taxation

• NTN (National Tax Number): Unique tax identity for individuals and businesses
• STRN (Sales Tax Registration Number): Required if your business collects sales tax

These numbers are used for:

• Filing returns
• Banking transactions
• Verifying tax status

Key Documents Required for Filing Income Tax in Pakistan 2025

Make sure to have:

• CNIC
• Bank statements
• Salary slips/business income records
• Utility bills (for address verification)
• Donation/zakat receipts
• Property or vehicle ownership details (if any)

FAQs – Income Tax in Pakistan 2025

Conclusion – Building a Tax-Responsible Nation

Paying income tax is not just a legal duty—it’s a contribution to national progress. When every citizen files accurately and on time, the government can invest better in schools, hospitals, roads, and security.

Whether you’re an employee, business owner, or freelancer, staying informed and compliant with tax laws helps build a stronger and more transparent Pakistan.

For professional tax assistance, consult with SECP-registered tax advisors or visit FBR.gov.pk.