PakIncomeTax
Withholding Tax Guide for Salaried Individuals
If you're salaried, your employer is legally required to withhold and deposit your income tax with FBR every month. Here's how that works, and how to check it's correct.
How monthly withholding is calculated
Under Section 149 of the Income Tax Ordinance 2001, employers estimate your total annual taxable salary at the start of (or during) the tax year, compute the annual tax due using that year's slabs, and then withhold 1/12th of that amount from each month's pay. If your salary changes mid-year (a raise, bonus, or new allowance), the employer is supposed to re-estimate and adjust the remaining months' withholding accordingly — which is why your take-home tax deduction can shift after a raise, sometimes by more than the raise itself feels like it should.
What counts as taxable salary
Taxable salary generally includes basic pay, all cash allowances (house rent, utilities, conveyance where not specifically exempt), and bonuses. It excludes amounts specifically exempted by law, most notably medical allowance up to 10% of basic salary — see our tax-saving guide for other exemptions employers may already be applying.
How to verify your employer got it right
- Take your annual gross salary (or monthly × 12) and any medical allowance from your payslip.
- Run both through the calculator for the current tax year to get the annual and monthly tax figures.
- Compare the monthly figure to the actual deduction on your payslip. Small differences (a few hundred rupees) are normal due to rounding or timing of a mid-year adjustment; large, consistent differences are worth raising with HR/Finance.
What if too much tax was withheld?
If your employer over-withheld during the year — common when bonuses are taxed at the point they're paid rather than annualized — the excess is reconciled when you file your annual return. Any overpayment becomes a refund claim; underpayment becomes additional tax payable at filing. This is one more reason filing matters even when your employer already deducts tax monthly: it's the only place the final reconciliation happens.
Multiple employers in one year
If you changed jobs during the tax year, each employer withholds tax as if it were your only income source, which usually under-withholds relative to your combined annual income once both salaries are added together. Declare all employers' income when filing to avoid a tax shortfall notice from FBR.