What are the business income tax rates in Pakistan for 2026-27?

Non-salaried individuals and associations of persons are taxed on six slabs: nil up to Rs 600,000; 15% on income above Rs 600,000 up to Rs 1,200,000; Rs 90,000 plus 20% up to Rs 1,600,000; Rs 170,000 plus 30% up to Rs 3,200,000; Rs 650,000 plus 40% up to Rs 5,600,000; and Rs 1,610,000 plus 45% above Rs 5,600,000. This structure was introduced by the Finance Act 2024 and left unchanged by the Finance Acts of 2025 and 2026, so it has now applied for three consecutive tax years. A section 4AB surcharge of 10% of the tax also applies where taxable income exceeds Rs 10 million.

Why is business tax higher than salary tax in Pakistan?

They are two different rate schedules in Division I of the First Schedule, and the non-salaried one is far steeper. It opens at 15% where the salaried table opens at 1%, and tops out at 45% against 35%. On a taxable income of Rs 3,000,000 a business owner pays Rs 590,000 against a salaried employee’s Rs 276,000 — Rs 314,000 more on identical income. The offsetting difference is what you may deduct. A business subtracts the expenses incurred in earning the income — rent, salaries paid, utilities, depreciation, cost of goods sold — before reaching taxable income. A salaried employee has almost no equivalent, so the headline rates are not directly comparable to gross receipts, only to income after allowable expenses.

What tax rate do freelancers pay in Pakistan?

A freelancer is taxed on the non-salaried slabs, because salary is not more than 75% of their taxable income. On net earnings of Rs 2,400,000 after deductible expenses, the tax is Rs 170,000 plus 30% of the amount above Rs 1,600,000 — Rs 410,000 for the year. Freelancers exporting IT or IT-enabled services should check the separate concessionary regime that has applied to export proceeds, which can be materially lower than the normal slabs. This calculator computes the normal slab position; confirm your eligibility for any export concession with a practitioner before relying on it.

How is an AOP or partnership firm taxed in Pakistan?

An association of persons is taxed as a separate entity on the same non-salaried slabs as an individual, reaching 45% above Rs 5,600,000, plus the 10% section 4AB surcharge above Rs 10 million of taxable income. Once the AOP has paid tax on its profit, a member’s share of that already-taxed profit is not taxed again in the member’s own hands, though it is included in their total income for rate purposes. That is the main structural difference from operating as a sole proprietor.

Which business expenses are deductible in Pakistan?

Section 20 allows any expenditure incurred wholly and exclusively for the purposes of the business — rent, salaries and wages, utilities, transport, professional fees, advertising, repairs, cost of goods sold, and depreciation on business assets under the Third Schedule. Expenses that are not deductible include personal or capital expenditure, fines and penalties, and payments made in cash above the statutory limits — section 21 lists the disallowances. Keeping invoices and bank records matters: an expense you cannot substantiate is an expense the Commissioner can disallow on audit.

What is minimum tax on turnover under section 113?

Section 113 charges a minimum tax computed on turnover rather than on profit, so that a business showing little or no taxable income still contributes. Where it applies, the tax payable is the higher of the normal slab computation and the minimum tax figure. For individuals and AOPs it comes into play once turnover reaches Rs 100 million. This calculator flags minimum tax when your turnover reaches that threshold but does not estimate it, because section 113 involves sector-specific rates and carry-forward of the excess against future liability — inputs that turnover alone cannot determine.

Does the 10% surcharge apply to business income?

Yes, and business income is now the only place it survives. Section 4AB charges 10% of the tax where an individual or AOP has taxable income above Rs 10 million. The Finance Act 2026 abolished the surcharge for income under the head "salary" from tax year 2026-27, but left it untouched for non-salaried income — so a business owner above Rs 10 million pays it while a salaried taxpayer no longer does. The surcharge is levied on the tax itself rather than on income. On taxable business income of Rs 12,000,000 the slab tax is Rs 4,490,000, so the surcharge adds Rs 449,000, bringing the total to Rs 4,939,000.

Business Tax Calculator Pakistan 2026-27

FBR Business & AOP Tax Slabs 2026-27 (Non-Salaried Rates)

Business income in Pakistan is taxed under Division I, Part I of the First Schedule to the Income Tax Ordinance 2001 — but on the non-salaried table, not the salaried one. The distinction matters enormously: the non-salaried schedule opens at 15% where the salaried schedule opens at 1%, and its top rate is 45% against 35%.

These rates apply to sole proprietors, freelancers, independent consultants, professionals in practice, traders, and associations of persons including partnership firms. You fall under the salaried table only where salary income is more than 75% of your total taxable income for the year.

Tax Year 2026-27 — non-salaried individuals & AOPs

Finance Act 2026 · 6 slabs · 10% surcharge above PKR 10,000,000

Current year

Annual taxable income	Rate	Tax payable
Up to PKR 600,000	0%	Nil
PKR 600,000 to PKR 1,200,000	15%	15% of the amount exceeding PKR 600,000
PKR 1,200,000 to PKR 1,600,000	20%	PKR 90,000 + 20% of the amount exceeding PKR 1,200,000
PKR 1,600,000 to PKR 3,200,000	30%	PKR 170,000 + 30% of the amount exceeding PKR 1,600,000
PKR 3,200,000 to PKR 5,600,000	40%	PKR 650,000 + 40% of the amount exceeding PKR 3,200,000
Above PKR 5,600,000	45%	PKR 1,610,000 + 45% of the amount exceeding PKR 5,600,000

The Finance Act 2026 left the business and AOP slab rates untouched. While salaried taxpayers received a second round of relief, non-salaried rates have now held at 15% to 45% for three consecutive years.

Key thresholds

Exempt threshold: PKR 600,000 of annual taxable income, the same as for salaried taxpayers.
Top rate: 45%, applying above PKR 5,600,000 of taxable income.
Section 4AB surcharge: 10% of the tax where taxable income exceeds PKR 10,000,000. Note this is 10% for business income — the 9% figure applies only to salary.

Business vs Salaried Tax in Pakistan — The Real Difference

At every income level above the exempt threshold, the same taxable income costs a business owner materially more than a salaried employee. The table below shows both, computed on identical taxable income for TY 2026-27.

Tax year 2026-27 rates, before the section 4AB surcharge which applies to both schedules above Rs 10 million.
Annual taxable income	Business / AOP	Salaried	Extra tax
PKR 600,000	PKR 0	PKR 0	—
PKR 1,200,000	PKR 90,000	PKR 6,000	+PKR 84,000
PKR 1,600,000	PKR 170,000	PKR 50,000	+PKR 120,000
PKR 2,400,000	PKR 410,000	PKR 156,000	+PKR 254,000
PKR 3,200,000	PKR 650,000	PKR 316,000	+PKR 334,000
PKR 5,600,000	PKR 1,610,000	PKR 976,000	+PKR 634,000
PKR 8,000,000	PKR 2,690,000	PKR 1,774,000	+PKR 916,000
PKR 12,000,000	PKR 4,490,000	PKR 3,174,000	+PKR 1,316,000

The offsetting advantage is deductibility. A business subtracts the expenditure incurred in earning the income before reaching taxable income; a salaried employee has almost no equivalent. So the two rate tables are not comparable against gross receipts — only against income after allowable expenses, which is what this calculator computes.

How to Calculate Business Income Tax in Pakistan (Step by Step)

Total your gross receipts for the tax year, which runs 1 July to 30 June. This is turnover before any costs.
Deduct allowable business expenditure under section 20 — rent, salaries and wages, utilities, transport, professional fees, advertising, repairs, cost of goods sold, and depreciation on business assets under the Third Schedule. Section 21 lists what cannot be deducted, including personal and capital expenditure, fines, and cash payments above the statutory limits.
Deduct allowable allowances such as Zakat paid under the Zakat and Ushr Ordinance 1980, which is deductible under section 60. What remains is your taxable income.
Apply the non-salaried slab your taxable income falls into: the slab’s fixed amount plus its marginal rate on the excess over the slab’s lower bound.
Add the section 4AB surcharge of 10% of that tax if your taxable income exceeds PKR 10,000,000.
Check minimum tax under section 113 if your turnover reaches Rs 100 million, where the tax payable becomes the higher of the normal computation and the minimum tax on turnover.

Unlike salaried taxpayers, whose employer withholds monthly under section 149, a business taxpayer is responsible for their own advance tax under section 147, paid quarterly, with default surcharge on any shortfall.

Business Tax FAQs (Pakistan 2026-27)

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