To establish how much you can pay on monthly and annual savings, it is important to know how your salary is taxed. The new tax brackets and lower rates included in the 2025-26 federal budget will be evident to salaried people in Pakistan, as there is a significant difference between the new taxation regime and its previous phase.
This article mentions those changes in a simplified manner, as the reason is that these changes are indeed complex and that there is a need to simplify the whole idea into a comparative discussion of the two years and how to charge your taxes in 2026 according to the new structure.
Overview of Tax Changes for 2026
The new budget has brought a lot of relief to the salaried persons (in the following ways):
- Raising the tax-free income limit from PKR 600,000 to PKR 600,000 (unchanged in amount but important in context).
- Reduction of the tax rate at other income levels, particularly for workers in the middle class.
- Imposing low slabs to pay less taxes on the poor.
These efforts align with the government’s efforts to reduce inflation affecting the salaried classes and enforce tax collections.
Updated Income Tax Slabs for Salaried Individuals (FY 2025–26)
Below are the new income tax slabs for the salaried class, which are effective from July 1, 2025.
| Annual Income (PKR) | Tax Rate (2026) | Tax Rate (2025) |
| Up to 600,000 | 0% | 0% |
| 600,001 – 1,200,000 | 2.5% | 5% |
| 1,200,001 – 2,200,000 | 11% | 12.5% |
| 2,200,001 – 3,200,000 | 23% | 25% |
| 3,200,001 – 4,100,000 | 30% | 32.5% |
| Above 4,100,000 | 35% | 35% |
What is the important point to take away? The first three slabs have lower rates, so you get to keep more of your salary, especially if you have an income between PKR 600,000 and PKR 3.2 million annually.
How Much Will You Save? FY 2025 vs FY 2026
Below are some examples of the possible savings.
| Monthly Salary | Annual Salary | Tax in 2025 | Tax in 2026 | Annual Savings |
| PKR 100,000 | 1,200,000 | PKR 30,000 | PKR 15,000 | PKR 15,000 |
| PKR 150,000 | 1,800,000 | PKR 90,000 | PKR 63,000 | PKR 27,000 |
| PKR 250,000 | 3,000,000 | PKR 360,000 | PKR 316,000 | PKR 44,000 |
| PKR 400,000 | 4,800,000 | PKR 735,000 | PKR 699,500 | PKR 35,500 |
Middle-level earners, in particular, those who earn between PKR 1.2 million and PKR 3.2 million annually, are given noticeable relief based on the revised rates.
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How to Calculate Your Income Tax for 2026
Here is a step-by-step method:
- Determine your annual income: This consists of your salary base, along with any allowances and bonuses.
- Subtract allowable exemptions: Zakat, approved charities, life insurance premiums, and retirement contributions are some of the deductions that may be eligible for tax benefits.
- Figure out your taxable income: The amount you pay through deductions should be subtracted from your total annual income.
- Use the tax rate on the new slab table above to compute your income.
- To get the amount of tax deduction each month, divide 12 by the amount that your employer is supposed to deduct.
Key Tax Reliefs and Exemptions to Remember
- All donations used to give Zakat are tax-deductible.
- Accepted charitable deductions provide tax credits.
- Medical allowance can be tax-free when it is not claimed as a reimbursement.
- Other exemptions are also taken through pension and gratuity funds, among other conditions.
Being aware of them will reduce your tax liability even further.
What Hasn’t Changed?
- The highest tax rate remains unchanged at 35% for individuals with high incomes (exceeding PKR 4.1 million).
- The basic exemption limit of PKR 600,000 has not been raised.
- Every person who earns more than the exemption limit is still obliged to file their tax returns annually.
Therefore, although there is some relief, compliance requirements remain constant.
Why These Changes Matter
Tax changes in 2026 are beneficial to more than 2.5 million salaried persons. These changes:
- Lighten the strain on the monthly salary packet
- Promote improved voluntary taxpaying.
- Enhance the saving and planning of financial resources.
Need Help Managing Your Tax?
If it still intimidates you to calculate your taxes, you are not the only one. That is where Sidekick steps in. Sidekick provides expert tax management services for salaried persons in Pakistan.
Suppose you require assistance in filing your yearly tax return, availing maximum deductions, or dealing with complicated FBR regulations. In that case, their professionals render your compliance easy and economical.
Conclusion
The 2025–26 federal budget is full of positives for Pakistan’s salaried class. Lower rates and rationalised slabs will result in more savings in your pocket. With information about these changes and preplanning, you can derive maximum benefits and remain free from year-end shocks.
If you are unsure how to incorporate these updates into your revenue, do not worry and hire the services of a reputable tax service like Sidekick to make your financial year smarter and more convenient.
