This calculator estimates your monthly salary tax (TDS) and resulting take-home pay in Pakistan. Enter your gross monthly salary plus any allowance components — the calculator applies the FBR salaried tax schedule, accounts for the medical allowance exemption, and shows itemised deductions and net pay.
Calculate Monthly Salary Tax
How monthly salary tax is calculated in Pakistan
Pakistani salary tax is annually-assessed but monthly-deducted. Your employer projects your annual salary (typically 12 × monthly gross plus expected bonuses), applies the salaried tax schedule to that projected annual figure, and divides the resulting annual tax by 12 to determine the monthly TDS. The medical allowance up to 10% of basic salary is exempt under standard rules; the calculator accounts for this if you enter a medical allowance figure. Other allowances (transport, fuel, conveyance, utility) are fully taxable unless your employer's policy specifically structures them as exempt under FBR rules.
The calculator's estimate represents what should appear as the TDS line on your payslip for a typical month. If your gross salary varies (commission-heavy roles, irregular bonus payments), your monthly TDS will vary — the calculator gives a baseline assuming consistent gross. For an annual reconciliation that accounts for variable income, the annual tax return is where the precise calculation happens.
The medical allowance exemption — when it actually applies
FBR rules exempt the medical allowance up to 10% of basic salary from income tax, provided two conditions: the allowance is specifically designated as medical (not folded into salary), and the employee maintains the right to claim it as medical expense if challenged. The exemption is one of the few standard tax-saving structures available to ordinary salaried workers. For an employee with Rs. 100,000 basic salary, up to Rs. 10,000 of monthly medical allowance is exempt — saving roughly Rs. 1,500–3,500 a month in tax depending on slab. The exemption requires that 'basic salary' is clearly defined in the employment contract; if your salary structure is monolithic (all-inclusive amount), the exemption doesn't apply because basic salary isn't separately defined.
Other deductions on Pakistani payslips
Beyond income tax, three common deductions appear on Pakistani payslips. First, EOBI (Employees' Old-Age Benefits Institution) contribution — Rs. 130 from employee, matched Rs. 130 by employer, for employees in EOBI-eligible organisations. Second, social security or workers' welfare fund — small amounts varying by province. Third, provident fund contribution — typically 10% of basic salary, matched by employer, for organisations with established provident fund schemes. Provident fund contributions reduce current take-home but represent retirement savings, so they're a different category from tax deductions. The calculator focuses on income tax (TDS) since that's the deduction that changes most with salary level and is hardest for employees to estimate independently.
Strategies for salaried workers to legitimately reduce tax burden
Three legitimate strategies materially reduce tax burden for typical salaried Pakistani workers. First, structure the salary package to include the maximum medical allowance (10% of basic) and ensure the exemption is documented. Second, contribute to a Voluntary Pension Scheme (VPS) — investments in approved VPS qualify for tax credit, effectively letting you redirect tax money into your own retirement savings. Third, maintain filer status (NTN registered and ATL active) — beyond the direct tax savings, the lower withholding rates on banking transactions and various services save typical urban earners Rs. 30,000–80,000 a year. None of these requires sophisticated tax planning; all are available to any salaried worker willing to spend a few hours setting them up.
Salary tax — common questions from employed workers
Why is my net salary so much lower than my CTC (cost to company) figure?
Three deductions stretch the gap between CTC and net salary. First, salary tax (TDS) deducted monthly under the FBR salaried schedule — typically Rs. 5,000–35,000 a month for mid-range salaries. Second, EOBI contribution (1% from employee, matched 1% by employer if applicable) — small but adds up. Third, provident fund contributions (typically 10% of basic salary if your company has one) — though these aren't a 'loss' as the money goes into your retirement account. Bonuses, year-end allowances, and benefits in kind (company car, housing) are part of CTC but may not show on every monthly payslip. For an honest CTC-to-cash conversion, take the published CTC, subtract employer-side contributions, subtract tax, subtract provident fund, divide by 12 for a monthly net figure.
How does Pakistan's monthly salary slab system work — is each month's tax independent?
No — salary tax is calculated annually but withheld monthly. Your employer projects your annual salary based on your monthly pay, calculates the annual tax due under the salaried schedule, and divides it by 12 to determine monthly TDS. This means if your salary changes mid-year, the monthly deduction adjusts to catch up — a mid-year raise can show as a sudden tax jump for several months as the employer recalculates the annual projection. At year-end (June 30), the employer issues a final reconciliation. If the actual annual tax differs from total TDS withheld, the difference is either deducted in the final months or refunded through your annual return filing.
Are bonuses, commissions, and one-time payments taxed differently from regular base salary?
For tax purposes, all employment income — base salary, allowances, bonuses, commissions, joining bonuses, retention bonuses, performance incentives — falls under the salaried tax schedule. There's no special bonus rate. However, the monthly TDS calculation often shows a temporary spike when bonuses are paid because the employer's projected annual income jumps, pushing more of the year's expected total into higher slabs. The spike usually reverses in following months as the projection normalises. Some specific items (gratuity on retirement up to limits, voluntary separation payments under approved schemes) have separate concessional treatment, but day-to-day bonuses don't.
What's the difference between TDS (tax deducted at source) and the annual final tax payment?
TDS is the monthly deduction your employer takes from your salary and remits to FBR on your behalf. Annual tax is the actual amount due based on your full year's income, calculated when you file your annual return. In most cases TDS roughly matches the actual annual tax — employers calculate it carefully. But discrepancies arise if you have additional income (rental, freelance, profit on investments) that pushes you into a higher slab, or if you have deductions/credits that reduce your actual liability. Your annual return reconciles TDS withheld against actual tax due, and either you owe additional tax or you're due a refund. Refunds for over-deducted TDS typically take 4–12 months to process.
Can I get a tax refund if my employer over-deducted, and how long does it actually take?
Yes — if TDS withheld exceeds your actual annual tax liability (often because of qualifying deductions, investment tax credits, or income changes mid-year), you can claim a refund through your annual return. The refund claim is processed by FBR after verification, typically taking 4 to 12 months from filing. The processing time depends partly on whether your return triggers any audit review (uncommon for ordinary salaried returns) and partly on FBR's processing backlog at the time. Refunds are deposited directly into the bank account listed in your tax return. For substantial refund amounts, using a tax practitioner improves the chances of clean processing and faster resolution.