Tax season can feel like a punch to the gut for salaried individuals in Pakistan. With rising inflation and stagnant wages, every rupee counts. Fortunately, there are legal and smart ways to reduce your tax burden and keep more of your hard-earned money.
In this guide, we’ll walk you through actionable strategies to save tax on your salary in Pakistan, updated for 2025, based on the latest tax laws and slabs under the Federal Board of Revenue (FBR).
Whether you’re a fresh graduate, a mid-level professional, or a senior executive, these tips will help you navigate Pakistan’s tax system like a pro.
Understanding Tax on Salary in Pakistan
Before we get into the “how,” let’s quickly cover the “what.” In Pakistan, salaried individuals are taxed under the Income Tax Ordinance, 2001. Your tax liability depends on your annual taxable income, which is calculated after certain deductions and exemptions. The FBR releases updated tax slabs every year in the Finance Act, and for 2025, the rates typically increase as your income rises.
For example:
- Income up to PKR 600,000 is usually exempt (check the latest slab for confirmation).
- Income between PKR 600,000 and PKR 1,200,000 might attract a 5% tax rate.
- Higher slabs (e.g., above PKR 6,000,000) can go up to 35%.for detail visit our salary income tax calculator.
The key to saving tax lies in reducing your taxable income—the amount the government actually taxes. Here’s how you can do it.
1. Maximize Your Tax Credits and Rebates
One of the easiest ways to save your tax on the salary is by claiming tax credits. These are reductions the FBR allows based on specific investments or expenses. Here are some popular options:
- Invest in Approved Schemes: Contributing to a government-approved pension fund or a Voluntary Pension Scheme (VPS) can earn you a tax credit. For 2025, you can claim a credit of up to 20% of your taxable income if you invest in such schemes. Talk to your employer or a financial advisor to set this up.
- Donations to Charity: Donations to FBR-approved institutions (e.g., Shaukat Khanum Hospital or Edhi Foundation) qualify for tax credits. Keep receipts and ensure the organization is listed under Section 61 of the Income Tax Ordinance.
- Educational Expenses: If you’ve paid tuition fees for your kids, you can claim a tax credit under Section 60C. The limit is usually 5% of your taxable income, so hold onto those fee challans!
💡: File these credits when submitting your annual tax return through the FBR’s IRIS portal. Missing documentation? You’ll lose out.
2. Take Advantage of Allowances and Perks
Your salary isn’t just your basic pay—it often includes allowances. Some of these can be tax-exempt if structured correctly:
- Medical Allowance: Up to 10% of your basic salary is exempt from tax if your employer provides a medical allowance and you use it for healthcare expenses.
- House Rent Allowance (HRA): If your employer offers HRA, a portion of it might be tax-free, depending on your rent agreement and salary structure.
- Conveyance Allowance: For employees who don’t get a company car, this allowance can be partially exempt if used for commuting.
How to Do It: Sit down with your HR department and ask them to restructure your salary package to include these allowances to save your tax on the salary . It’s a win-win your take-home pay increases, and your taxable income shrinks.
3. Contribute to a Provident Fund
If your company offers a provident fund, jump on it! or you can invset by yourself Contributions to an approved provident fund are exempt from tax up to a certain limit (usually PKR 150,000 or 10% of your basic salary, whichever is lower). Not only does this lower your taxable income, but it’s also a great way to build a retirement nest egg.
Heads-Up: Check with your employer to ensure the fund is FBR-approved. Some private schemes don’t qualify.
4. Claim Deductions on Loan Interest
Got a home loan? The interest you pay on it can reduce your taxable income. Under Section 64B, salaried individuals can claim a deduction on the markup (interest) paid on a housing loan, up to PKR 1,000,000 annually. This applies to loans taken from banks or financial institutions for buying or building a house.
Action Step: Gather your loan repayment statements from the bank and submit them with your tax return. It’s a small effort for a big reward.
5. Opt for Tax-Exempt Investments
Putting your money in the right places can help to save your tax on the salary. Here are two solid options:
- National Savings Schemes: Profits from instruments like Bahbood Savings Certificates or Defense Savings Certificates are often tax-exempt for salaried individuals, especially old citizens or widows.
- Life Insurance Premiums: Premiums paid for life insurance policies (up to a limit) can be deducted from your taxable income under Section 62.
Why It Works: These investments not only save tax but also grow your wealth over time. Consult a financial planner to pick the best scheme for your income level.
Furthermore you can avail the tax refunds from the your advance paid taxes ( withoding taxes) for complete details you can check out our detail guide What is Withholding Tax in Pakistan? Complete Guide (2025).
6. File Your Tax Return Correctly
This might sound basic, but tons of salaried folks in Pakistan miss out on tax savings simply because they don’t file their returns—or file them wrong. Filing your tax return makes you an “active taxpayer,” which comes with perks like lower withholding tax rates on bank transactions and property purchases.
How to File:
- Log into the FBR’s IRIS portal (create an account if you haven’t).
- Enter your income details, deductions, and credits.
- Double-check your numbers and submit by the deadline (usually September 30).
💡:Check out our Comprehensive guide How to File Income Tax Return in Pakistan – Complete Guide 2025.
Missed the deadline? You can still file late with a small penalty—better late than never!
7. Reduce Taxable Income Through Business Expenses (If Applicable)
If you’re a salaried person with a side gig—like freelancing or consulting—you can claim business-related expenses (e.g., internet bills, laptop depreciation) to lower your taxable income. Keep proper records and receipts to back up your claims.
Note: This only works if you declare your side income. Hiding it isn’t worth the risk—FBR’s data-sharing with banks is tighter than ever in 2025.
- Ignoring Small Deductions: Every little bit adds up—don’t skip claiming minor expenses like charity donations or medical costs.
- Not Consulting HR: Your employer can tweak your salary structure to save tax, but only if you ask.
- Missing Deadlines: Late filings mean penalties and lost opportunities.
Saving tax on your salary in Pakistan isn’t rocket science—it’s about knowing your rights and using them smartly. With the cost of living climbing in 2025, every tax-saving trick counts. Review your payslip, talk to your employer, and explore investment options. If you’re unsure, a tax consultant can help tailor a plan to your income.
Got questions about tax slabs or deductions? Drop them in the comments below—we’d love to help! And if you found this guide useful, share it with your colleagues. Let’s keep more money in our pockets, legally and wisely.
