Understanding Your Income Tax Obligations for 2026-27
Start with the basics
Income tax in Pakistan is a federal levy, so the same salary slabs apply nationwide under the Income Tax Ordinance 2001. Understanding your obligations for 2026-27 — set by the Finance Act 2026 (Federal Budget 2026-27) — means knowing three things: your taxable income, the slab that applies, and what you must file.
The 2026-27 salary tax slabs
| Annual taxable income (Rs) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 1% over 600,000 |
| 1,200,001 – 2,200,000 | 6,000 + 11% over 1,200,000 |
| 2,200,001 – 3,200,000 | 116,000 + 20% over 2,200,000 |
| 3,200,001 – 4,100,000 | 316,000 + 25% over 3,200,000 |
| 4,100,001 – 5,600,000 | 541,000 + 29% over 4,100,000 |
| 5,600,001 – 7,000,000 | 976,000 + 32% over 5,600,000 |
| Above 7,000,000 | 1,424,000 + 35% over 7,000,000 |
Allowances: mostly taxable
A common misconception is that allowances are tax-free. In reality, most — house rent, conveyance, utilities, mobile — are fully taxable. Two important reliefs remain under the Second Schedule:
- Medical allowance — exempt up to 10% of basic salary (Clause 139), but only where free medical treatment or health insurance is not separately provided.
- Employer provident fund — exempt up to the lower of 10% of basic or Rs 150,000 per year.
These rules are unchanged by the Finance Act 2026.
EOBI and social security
Under the EOBI Act 1976, the employer contributes 5% and the employee 1% of the minimum wage. The budget proposes a minimum wage of Rs 40,700.
A worked example
Take an employee with Rs 2,000,000 in annual taxable income. They fall in the 1,200,001–2,200,000 band: Rs 6,000 plus 11% of (2,000,000 − 1,200,000) = Rs 6,000 + Rs 88,000 = Rs 94,000 for the year.
Your filing duties
- File your annual income tax return with FBR.
- Appear on the Active Taxpayers List to access filer rates.
- Keep records of salary, allowances and deductions.
How Zaffre simplifies your obligations
Zaffre HRM from Zaffre Tech auto-applies the 2026-27 FBR slabs, correctly handles allowance taxability, the Clause 139 medical exemption, provident fund limits and EOBI — every payroll run. Across Zaffreaxon, this configuration lives centrally, so employees see accurate take-home pay and employers stay compliant. Zaffre Axon turns a complex set of rules into a reliable, automatic calculation.
You can also check any salary at https://zaffreaxon.com/salary-tax-calculator.
References: Finance Act 2026 (Federal Budget 2026-27); Income Tax Ordinance 2001 (First and Second Schedules); EOBI Act 1976; FBR.
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