If you run a sole proprietorship, a partnership or any association of persons in Pakistan, you are not taxed on the salaried slab table. You are taxed on a separate, much steeper one that starts at 15% and reaches 45%.
This is the single most misreported figure in Pakistani tax content. A large number of websites publish the salaried table — 1%, 11%, 23%, 30%, 35% — and label it “business tax rates”. It is not. A business owner who plans around those numbers will under-provide for tax by a wide margin.
This guide gives you the correct table for tax year 2026, the test that decides which table applies to you, the special 40% cap for professional firms, and the surcharge and minimum-tax rules that catch business owners out.
Quick answer: For tax year 2026, non-salaried individuals and associations of persons in Pakistan pay 0% up to Rs 600,000, then 15%, 20%, 30%, 40% and finally 45% on taxable income above Rs 5,600,000. An AOP that is a professional firm barred from incorporating is capped at 40%. A 10% surcharge applies where taxable income exceeds Rs 10 million. These rates come from Division I of Part I of the First Schedule to the Income Tax Ordinance 2001.
Filing for tax year 2026 closes on 30 September 2026. Filing.pk can handle your business return end to end.
These rates apply to every individual whose income is not mainly salary — sole proprietors, traders, consultants, doctors and lawyers in private practice, commission agents, contractors — and to every association of persons, which includes partnership firms registered and unregistered.
| Taxable income | Tax payable |
|---|---|
| Up to Rs 600,000 | 0% |
| Rs 600,001 – Rs 1,200,000 | 15% of the amount exceeding Rs 600,000 |
| Rs 1,200,001 – Rs 1,600,000 | Rs 90,000 + 20% of the amount exceeding Rs 1,200,000 |
| Rs 1,600,001 – Rs 3,200,000 | Rs 170,000 + 30% of the amount exceeding Rs 1,600,000 |
| Rs 3,200,001 – Rs 5,600,000 | Rs 650,000 + 40% of the amount exceeding Rs 3,200,000 |
| Above Rs 5,600,000 | Rs 1,610,000 + 45% of the amount exceeding Rs 5,600,000 |
Source: Division I of Part I of the First Schedule, Income Tax Ordinance 2001, as substituted by the Finance Act 2024 and unchanged by the Finance Act 2025. Applies to tax year 2026, the year running 1 July 2025 to 30 June 2026.
Why you may have seen different numbers. Many Pakistani tax sites, and several automated answer engines, publish this table as the business rates:
0% · 1% · 11% · 23% · 30% · 35%
That is the salaried table, and it sits in a different sub-clause of the same Division. Copying it across is an easy mistake to make from the printed Ordinance, because amended and superseded tables appear on the same pages. But the difference is enormous: on the first slab alone the business rate is fifteen times the salaried rate. Check the numbers against FBR's published Ordinance before you rely on any figure you find online, including ours.
The Ordinance does not sort taxpayers by job title. It sorts them by a single arithmetic test written into Division I:
Where income chargeable under the head “salary” exceeds 75% of your taxable income, the salaried rates apply. In every other case, the business and AOP rates apply.
Two consequences follow, and both catch people out.
The threshold is 75%, not 50%. Several guides still quote 50%, which was the position under an older version of the clause. If salary is 60% of your income and business profit is 40%, you fall on the business side and every rupee of your taxable income is charged at business rates — including the salary.
It is all-or-nothing. There is no blending. You do not tax the salary portion on one table and the business portion on the other. One test, one table, applied to the whole of taxable income.
If salary really is more than 75% of your income, our salary tax guide for 2025-26 has the right table and a calculator for it.
The gap between the two tables is not marginal. Here is the tax due on identical taxable income under each, before any surcharge.
| Taxable income | Business / AOP | Salaried | Difference | Effective rate |
|---|---|---|---|---|
| Rs 1,000,000 | Rs 60,000 | Rs 4,000 | Rs 56,000 | 6.0% |
| Rs 1,500,000 | Rs 150,000 | Rs 39,000 | Rs 111,000 | 10.0% |
| Rs 2,400,000 | Rs 410,000 | Rs 162,000 | Rs 248,000 | 17.1% |
| Rs 4,000,000 | Rs 970,000 | Rs 586,000 | Rs 384,000 | 24.2% |
| Rs 6,000,000 | Rs 1,790,000 | Rs 1,281,000 | Rs 509,000 | 29.8% |
| Rs 12,000,000 | Rs 4,490,000 | Rs 3,381,000 | Rs 1,109,000 | 37.4% |
Worked example. A trader with taxable income of Rs 2,400,000 falls in the fourth slab. Tax is Rs 170,000 plus 30% of the Rs 800,000 above Rs 1,600,000, which is Rs 240,000. Total Rs 410,000. A salaried person on the same income pays Rs 162,000.
Note that taxable income for a business is profit after allowable business expenses, not turnover. Rent, salaries, utilities, depreciation, mark-up on business borrowing and other expenses incurred wholly for the business are deductible. Keeping proper books is what makes those deductions defensible if FBR asks.
An AOP — most commonly a partnership firm — is taxed as a separate person under section 92, not as a look-through to its partners. Four rules matter.
1. Professional firms are capped at 40%. Where an AOP is a professional firm prohibited from incorporating by law or by the rules of the body regulating that profession, the 45% top rate becomes 40%. Chartered accountancy practices and legal partnerships are the usual examples. What it saves:
| Taxable income | Standard AOP | Professional firm | Saving |
|---|---|---|---|
| Rs 8,000,000 | Rs 2,690,000 | Rs 2,570,000 | Rs 120,000 |
| Rs 10,000,000 | Rs 3,590,000 | Rs 3,370,000 | Rs 220,000 |
| Rs 12,000,000 | Rs 4,490,000 | Rs 4,170,000 | Rs 320,000 |
2. Partners are not taxed again on their share. Where the AOP has paid tax, the amount a member receives out of the association's income is exempt in that member's hands under section 92(1). Partners still file their own returns and still declare the share — it is exempt, not invisible.
3. Large AOPs lose that exemption without audited accounts. A proviso added by the Finance Act 2024 removes the member's exemption where the AOP has turnover of Rs 300 million or more in the tax year or any preceding year and has not filed financial statements audited by a firm of chartered accountants or cost and management accountants alongside its return. If your firm is near that threshold, the audit is no longer optional.
4. A company partner is carved out. If at least one member of the AOP is a company, that company's share is excluded from the AOP's total income and taxed separately at company rates.
Surcharge under section 4AB. Where taxable income exceeds Rs 10 million, a surcharge is payable on top of the tax. The rate is 10% for individuals and AOPs generally, but a proviso added by the Finance Act 2025 sets it at 9% for an individual deriving income under the head salary. Business owners pay the higher figure.
At Rs 12,000,000 of taxable income
Business or AOP: Rs 4,490,000 tax + Rs 449,000 surcharge = Rs 4,939,000
Salaried: Rs 3,381,000 tax + Rs 304,290 surcharge = Rs 3,685,290
Minimum tax under section 113. This one is widely overstated. Minimum tax of 1.25% of turnover applies to an individual or AOP only where turnover is Rs 100 million or above in the tax year or any subsequent year. Below that threshold it does not apply to you at all, whatever a loss-making year looks like. Certain sectors have lower rates — 0.25% for distributors of pharmaceutical products, fast-moving consumer goods and cigarettes, rice mills and flour mills, among others.
Advance tax under section 147. Business owners pay in quarterly instalments rather than once a year. An individual with latest assessed income of Rs 1 million or more pays by 15 September, 15 December, 15 March and 15 June. An AOP or company pays by 25 September, 25 December, 25 March and 15 June. Missing instalments attracts default surcharge even if the annual return is filed on time.
The return for tax year 2026 covers 1 July 2025 to 30 June 2026 and is due by 30 September 2026. Business and AOP returns differ from a salaried return in four practical ways.
The step-by-step IRIS process is covered in our guide to filing an income tax return in Pakistan. If you are still deciding whether it is worth being on the Active Taxpayer List at all, the filer versus non-filer comparison puts a number on it.
Business and AOP returns are where most self-filing goes wrong — the wrong slab table, expenses that cannot be substantiated, missed advance-tax instalments, a wealth statement that will not reconcile. Filing.pk prepares business and partnership returns end to end, online, at prices up to 30% below other portals.
For tax year 2026, non-salaried individuals and AOPs pay 0% up to Rs 600,000; 15% of the excess between Rs 600,001 and Rs 1,200,000; Rs 90,000 plus 20% between Rs 1,200,001 and Rs 1,600,000; Rs 170,000 plus 30% between Rs 1,600,001 and Rs 3,200,000; Rs 650,000 plus 40% between Rs 3,200,001 and Rs 5,600,000; and Rs 1,610,000 plus 45% above Rs 5,600,000.
Yes, substantially. The salaried table runs from 1% to 35%; the business and AOP table runs from 15% to 45%. On taxable income of Rs 2,400,000 a business owner pays Rs 410,000 against Rs 162,000 for a salaried person on the same income.
Apply the 75% test. If income chargeable under the head salary exceeds 75% of your taxable income, the salaried rates apply to all of your taxable income. Otherwise the business and AOP rates apply to all of it. There is no blending of the two tables.
An AOP is taxed on the same slab table as non-salaried individuals, reaching 45% above Rs 5,600,000. Where the AOP is a professional firm prohibited from incorporating by law or by its regulating body, the top rate is capped at 40%.
No, provided the AOP has paid its tax. Under section 92 the share received by a member is exempt in the member's hands. The exception is an AOP with turnover of Rs 300 million or more that has not filed audited financial statements with its return, in which case the member's share is not exempt.
Section 4AB imposes a surcharge of 10% of the income tax where taxable income exceeds Rs 10 million. A proviso reduces this to 9% for individuals deriving income under the head salary, so business owners and AOPs pay the full 10%.
Only if turnover reaches Rs 100 million or more. Minimum tax under section 113 applies to individuals and AOPs at that threshold, generally at 1.25% of turnover with lower rates for specified sectors. Below Rs 100 million of turnover it does not apply.
30 September 2026, covering the year from 1 July 2025 to 30 June 2026. Advance tax instalments fall earlier: 15 September, 15 December, 15 March and 15 June for individuals, and 25 September, 25 December, 25 March and 15 June for AOPs.
Based on Division I of Part I of the First Schedule and sections 4AB, 92, 113 and 147 of the Income Tax Ordinance 2001, as amended to date, for tax year 2026. This is general information, not tax advice. Rates change with each Finance Act, so please verify on fbr.gov.pk or contact us about your own situation.