Salaried employees

Tax on salary, deductions by your employer, allowances, perks and refunds. Each answer below explains one point in plain words, works through an example, and links the exact section of the law it relies on.

• Can tax paid on my mobile bill or electricity bill be adjusted against my salary tax, and can my employer take it into account?How advance tax on mobile, internet and electricity bills can cut the tax deducted from your salary, and which part of electricity bill tax is not adjustable.
• I changed jobs mid-year; will my new employer account for tax my old employer deducted?Section 149 lets a new employer adjust for tax your old employer already deducted, once it has documentary evidence such as the section 164 certificate.
• If my company gives me a car, how much is added to my taxable salary?Rule 5 of the Income Tax Rules adds 5% of a company car's cost to salary for mixed use and 10% for personal use only. How it works, with a worked example.
• My employer deducted tax from my salary but did not deposit it; am I liable?Under sections 160, 161 and 168, tax your employer deducted counts as paid by you, and the employer is personally liable to deposit it. What the law says.
• How is a golden handshake or redundancy payment taxed when I am laid off?A golden handshake is salary under section 12, but section 12(6) lets you elect an average rate from your last three tax years. Worked example inside.
• How does my employer calculate the tax deducted from my salary each month?Section 149 makes your employer deduct salary tax at your average rate on estimated annual salary. See the A/B formula and a month by month example.
• Is my Eid or performance bonus taxable, and why was more tax deducted in my bonus month?Section 12 treats a bonus as salary, and section 149 re-estimates your annual salary when it is paid. See why tax spikes in the bonus month, with figures.
• Is an interest-free or low-interest loan from my employer taxed as salary?Section 13(7) taxes interest-free staff loans above Rs. 1 million at a 10% benchmark rate, and waived loans count as salary too. Rules and a worked example.
• Is my conveyance, fuel or travel allowance taxable?Section 12 taxes fixed conveyance, fuel and travel allowances as salary. Only money actually spent on your employer's duties escapes tax. Worked example inside.
• Is house rent allowance, a company-provided house, or employer-paid utilities taxable?House rent allowance is fully taxable salary. A company house is valued under rule 4, and employer-paid utilities and domestic staff are added to salary.
• Is leave encashment taxable when I cash in my unused leave?Leave encashment is salary under section 12 and is taxed at slab rates. Only leave cashed before retirement by armed forces and government employees is exempt.
• Is medical allowance tax free, and what about medical bills my company reimburses?How clause (139) of the Second Schedule exempts employer medical treatment, reimbursed bills and a medical allowance up to 10% of basic salary, with an example.
• Do I still need to file a tax return if my employer already deducts tax from my salary?Tax deducted by your employer does not end the duty to file. Section 114 lists who must file a return, including salaried people above Rs. 600,000.
• If my employer pays my income tax for me (net salary package), is that also taxable?Section 12(3) grosses up your salary by the tax your employer pays for you on a net or tax-free package. What that means, with a step-by-step illustration.
• Can contributions to a voluntary pension fund or charity reduce the tax deducted from my salary?How the section 63 pension fund credit and section 61 donation credit work for salaried people, their caps, and how an employer applies them through payroll.
• Too much tax was deducted from my salary; how do I get a refund?Excess salary tax becomes a refund under sections 168 and 170. File your return, then the Board may refund it electronically or you apply within three years.
• What is the last date for salaried people to file their return, and what is the penalty for filing late?A salaried person's return is due by 30 September. Late filing costs the higher of 0.1% of tax or Rs. 1,000 a day, with a Rs. 10,000 minimum, under section 182.
• I received salary arrears this year; can they be taxed at the rates of the year I earned them?Section 12(7) lets an employee elect, by written notice, to have salary arrears taxed at the rates of the year the work was done. How and when to elect.
• I have salary plus rental income or a side business; do I still get the salaried tax rates?The salaried tax table applies only when salary is over 75% of taxable income. Here is how rent or business income can move you onto the higher general table.
• What is the salary tax deduction certificate, and does my employer have to give it to me?Section 164 requires an employer who deducts tax from salary to give a certificate and payment receipt copies. Here is what it contains and how it is used.
• How much income tax is payable on my salary in tax year 2027, and up to what salary is there no tax?Salary tax slabs for tax year 2027 from the Income Tax Ordinance: no tax up to Rs. 600,000 a year, then 1% to 35%, with worked monthly examples.
• Is there still a tax rebate for full-time teachers and researchers?The 25% salary tax cut for full-time teachers and researchers ended after tax year 2025. What the law said, who it covered, and what applies in tax year 2027.
• I work two jobs at the same time; how is tax on both salaries worked out?Each employer deducts tax on its own estimate, but the law taxes your total salary once on one slab table. Why a shortfall appears and how it is settled.
• What counts as salary for tax purposes: are overtime, commission and perks included?Section 12 of the Income Tax Ordinance treats overtime, bonus, commission, allowances, reimbursements and perks as salary. Here is what that means for you.
• Do Zakat, my children's tuition fees or my house loan reduce my salary tax?Zakat and tuition fees are deductible allowances, and profit on a loan for one modest house gives a tax credit. How each works for salaried people in 2027.