How much can Zakat and a pension contribution reduce the tax on a PKR 3,000,000 salary?
An estimated PKR 46,483 in 2026-27: the tax falls from PKR 276,000 to PKR 229,517 with PKR 100,000 of Zakat paid under the Ordinance and PKR 300,000 paid into a Voluntary Pension System fund.
On their own they are worth PKR 20,000 and PKR 27,600, but not both in full: the Zakat lowers taxable income, and the pension credit is then worked out at the lower average rate. That is why the optimizer combines reliefs by recalculating, never by adding up.
Tax reliefs for salaried people in 2026-27
| Relief | Type | Limit and conditions |
|---|---|---|
| Medical allowanceClause (139), Part I, Second Schedule | Exemption | Up to 10% of basic salary, where no free treatment or reimbursement is given |
| ZakatSection 60 | Deduction | Zakat paid under the Zakat and Ushr Ordinance |
| Children’s tuition feesSection 60D | Deduction | Taxable income under PKR 1,500,000; lesser of 5% of fees, 25% of income, PKR 60,000 per child |
| Voluntary pension fundSection 63 | Tax credit | Contributions up to 20% of taxable income |
| Charitable donationsSection 61 | Tax credit | Up to 30% of taxable income (15% to an associate); approved recipients only |
| Housing loan profitSection 63A | Tax credit | Up to 30% of taxable income; one house up to 2,500 sq ft of land or a flat up to 2,000 sq ft |
The 25% reduction for full-time teachers and researchers applied only from tax year 2022-23 to 2024-25; the optimizer still checks it for those years.
Reliefs that no longer exist
Older guides still mention reliefs that have been removed from the Ordinance, and this optimizer does not offer them: the 50% reduction for taxpayers over 60 (omitted in 2014), the deductible allowance for house-loan profit under section 60C, and the tax credits for investing in shares or insurance and for health insurance under sections 62 and 62A (all omitted by the Finance Act 2022).
Tax planning, not tax evasion
Every relief here is one the law offers for something you actually do - pay Zakat, fund a pension, give to an approved charity. Claiming it needs genuine receipts and records. Under-reporting salary, inventing donations or backdating payments is not planning; it is an offence. If more tax was deducted than you owe, the tax refund calculator shows the overpayment.
Salary tax optimizer FAQs
By claiming the reliefs the Income Tax Ordinance allows: the medical allowance exemption (up to 10% of basic salary where your employer gives no free treatment or reimbursement), Zakat paid under the Zakat and Ushr Ordinance, the tuition fee allowance if your taxable income is under PKR 1.5 million, and tax credits for contributions to a Voluntary Pension System fund, eligible donations and - from tax year 2025-26 - profit on a loan for one modest home. Each has conditions and needs documents.
An exemption or deduction lowers your taxable income, so it saves tax at the rates of the slabs it comes off. A tax credit is taken off the tax itself: under sections 61, 63 and 63A it is your average rate of tax times the eligible amount, up to each credit’s limit.
Zakat paid under the Zakat and Ushr Ordinance 1980 - for example deducted by your bank - is a deductible allowance under section 60: it reduces your taxable income. Any part that cannot be used in the year is not refunded or carried forward. Zakat given privately is not covered.
They give a tax credit, not a deduction, and only for donations to the recipients section 61 lists: approved non-profit organisations, universities and boards set up by law, government institutions and relief funds, and entities in the Thirteenth Schedule. A cash donation counts only if paid by crossed cheque, and the amount counted is limited to 30% of taxable income (15% for a donation to an associate).
No. A refund means more tax was deducted from your salary than you owed; your liability did not go down. A relief lowers the liability itself. Some reliefs, such as the tuition fee allowance, are not taken into account in monthly deductions, so their benefit arrives as a refund when you file.
Sources and updates
Income Tax Ordinance 2001, amended up to 30 June 2026: salaried rates in Division I, Part I of the First Schedule; Second Schedule, Part I, clause (139) and Part III, clause (3A); deductible allowances under sections 60 and 60D; tax credits under sections 61, 63 and 63A, applied under section 65.
- Income Tax Ordinance 2001, amended up to 30 June 2026 — Federal Board of Revenue (FBR). The full text of the law, including the First Schedule rate tables (PDF).
- Income Tax Basics — Federal Board of Revenue (FBR). FBR’s own overview of who pays income tax and how.
- File Income Tax Return — Federal Board of Revenue (FBR). FBR’s instructions for filing a return.
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Tax Pakistan is an independent site, not part of FBR or any government body. Where a figure matters — a return, a refund claim, a dispute — confirm it against the official source or with a tax adviser.