Tax Saving Tips for Salaried Pakistanis

1. Medical allowance (the most common)

Up to 10% of your basic salary is completely exempt from income tax if paid as a medical allowance. For a Rs. 150,000/month gross salary structured with a typical basic-to-gross split, this can shelter Rs. 10,000–15,000/month from taxable income. Check your salary structure with HR — many employers already split pay this way, but not all employees realize the exemption exists or is being applied correctly. Our calculator lets you enter this figure directly.

2. Zakat deduction

Zakat deducted compulsorily from your bank account under the Zakat and Ushr Ordinance is subtracted directly from your tax payable, not just your taxable income — which makes it one of the most powerful deductions available, rupee for rupee.

3. Approved pension funds

Contributions to EOBI, approved pension funds, or Voluntary Pension Schemes (VPS) regulated by the SECP are deductible from taxable income. VPS contributions in particular can earn a tax credit of up to 20% of your taxable income (higher for those over 40, subject to annual limits) — worth discussing with a licensed pension fund manager if you're not already contributing.

4. Life insurance premiums

Premiums paid to life insurance companies registered with the SECP are deductible up to Rs. 150,000/year (or 10% of taxable income, whichever is lower, subject to the applicable Finance Act limits). This applies to conventional life insurance and some takaful products.

5. Charitable donations

Donations to FBR-approved non-profit organizations — including institutions like Edhi Foundation, Shaukat Khanum Memorial Cancer Hospital, and Aga Khan Development Network entities — qualify for a tax credit, generally capped at 30% of taxable income for individuals. Always confirm the receiving organization is on FBR's approved list before assuming eligibility.

Putting it together

These deductions stack: a salaried employee with a well-structured medical allowance, active Zakat deduction, and a pension fund contribution can often reduce effective tax by several percentage points compared to someone claiming none of them. None of these require a tax consultant to claim — they're entered directly on the IRIS return during filing.