The taxation system of Pakistan is a multifaceted framework comprising federal and provincial levies on income, goods, and services. This guide provides a detailed exposition of the current tax rates applicable across various categories, including federal income tax for individuals, associations of persons (AOPs), and corporations, as well as federal sales tax on goods and services.
For individuals whose income from salary exceeds 75% of their total taxable income, a specific set of salary tax slabs and rates is applicable for the fiscal year 2024-2025.
Individuals & AOPs Tax Slabs
The income tax rates applicable to AOPs in Pakistan for the fiscal year 2024-2025 align with those for non-salaried individuals or whose income from salary is less than 75% of their total taxable income. This indicates a consistent tax treatment for unincorporated business structures and individuals whose primary income is derived from business or profession.
As detailed in below table, the tax structure is progressive. A specific set of tax slabs and rates is applicable for the fiscal year 2024-2025, with increasing rates applied to higher income brackets.
Income Tax Slabs Individuals and AOPs (FY 2024-25)
| S.No | Taxable Income (PKR) | Rate of Tax |
| 1 | Does not exceed 600,000 | 0% |
| 2 | Exceeds 600,000 but does not exceed 1,200,000 | 15% of the amount exceeding 600,000 |
| 3 | Exceeds 1,200,000 but does not exceed 1,600,000 | PKR 90,000 + 20% of the amount exceeding 1,200,000 |
| 4 | Exceeds 1,600,000 but does not exceed 3,200,000 | PKR 170,000 + 30% of the amount exceeding 1,600,000 |
| 5 | Exceeds 3,200,000 but does not exceed 5,600,000 | PKR 650,000 + 40% of the amount exceeding 3,200,000 |
| 6 | Exceeds 5,600,000 | PKR 1,610,000 + 45% of the amount exceeding 5,600,000 |
Small and Medium Enterprises (SMEs) engaged in the manufacturing sector benefit from special income tax rates based on their annual business turnover.
- Category 1 SMEs, with a turnover not exceeding PKR 100 million, are taxed at 7.5% of their taxable income.
- Category 2 SMEs, with a turnover exceeding PKR 100 million but not exceeding PKR 250 million, are taxed at 15% of their taxable income.
Furthermore, SMEs have the option to opt for a final tax regime (FTR) based on their gross turnover, with rates of 0.25% for Category 1 and 0.5% for Category 2. This differentiated tax regime aims to support the growth and development of the SME sector.
Corporate Tax Rates in Pakistan
The federal corporate income tax rates in Pakistan vary based on the type of company. For the fiscal year 2024-2025, banking companies are subject to a tax rate of 39%, while public companies (other than banking companies) and any other companies face a rate of 29%. A reduced rate of 20% is applicable to small companies. , whose annual turnover is less than 250 million rupees.
Where the tax payable by a company is less than 1.25% of its turnover, the company is required to pay a minimum tax equivalent to 1.25% of the turnover.
Super Tax Rates in Pakistan
In addition to the standard corporate income tax rates, a Super Tax is also imposed on high-earning companies. This tax is levied on a slab-wise basis for companies with income exceeding PKR 150 million, with rates ranging from 1% to 10% depending on the income bracket.
The highest rate of 10% applies to companies with income exceeding PKR 500 million. The reintroduction and tiered structure of the Super Tax indicate a governmental strategy to increase revenue from the most profitable corporate entities.
Alternate Corporate Tax (ACT): The Alternate Corporate Tax (ACT) sets the minimum tax liability for corporations as the higher of 17% of their accounting income or their corporate tax liability calculated under the Income Tax Ordinance 2001, including the minimum tax on turnover. This acts as an additional safeguard to ensure a minimum level of tax contribution from companies.
Export Income Tax Rates in Pakistan
The taxation regime for exporters has undergone a significant change with the abolition of the Final Tax Regime (FTR). Income from exports is now subject to the normal tax rates. However, a tax collected at the rate of 1% on export proceeds is treated as a minimum tax. This shift aims for greater equity in taxation across different income sources.
An exception exists for the export of IT and IT-enabled services by entities registered with the Pakistan Software Export Board (PSEB), where a withholding tax (WHT) of 0.25% is considered the final discharge of tax liability until the tax year 2026.
Sales Tax Rates
The federal government levies sales tax on the supply of goods and services, with a standard rate and specific variations and exemptions.
The current standard federal sales tax rate on goods in Pakistan is 18%. This rate was increased from 17% in 2023 as part of measures to reduce the fiscal gap and increase the tax-to-GDP ratio. While the standard rate applies to most goods, certain exemptions and variations exist based on the nature of the goods and government policies.
Sales Tax on Services is 15% in Islamabad, Sindh, Balochistan and Khyber Pakhtunkhwa. However, in Punjab GST rate is 16%.
Taxes on Agricultural Income
While agricultural income is exempt from federal income tax in Pakistan, this does not mean it is entirely tax-free. Under the Constitution of Pakistan, the authority to tax agricultural income lies with the provincial governments. This means each province has its own rules, tax slabs, and exemptions regarding agricultural income.
If you earn income through agriculture, it’s essential to understand the agricultural tax laws of the province where your agricultural land is situated.
Understanding business and individual income tax rates is essential for responsible financial management in Pakistan. By referring to these tax rates and consulting a tax professional, businesses can ensure they are fulfilling their tax obligations accurately.
