My salary is exactly 75% of my taxable income. Which table applies?

Clause (1), the business table. Clause (2) applies only where salary exceeds seventy-five per cent of taxable income. At exactly 75%, salary does not exceed that share.

Is my salary taxed on one table and my business on the other?

No. Division I picks one table for the individual, and that table is applied to the whole taxable income. There is no split where salary goes on the salaried table and business profit on the business table.

My employer already deducts tax from my salary. Is that the end of it?

Section 149 requires the employer to deduct tax on the estimated income of the employee chargeable under the head Salary. It does not take the business income into account, so where the business income changes the table or adds tax, the employer's deduction will not match the final liability worked out on the return.

Sole proprietors and small businessesLaw current to 30 June 2026

I have a job and a side business. Which tax slab applies to me, salaried or business?

Short answer

It depends on one ratio. Under clause (2) of Division I of the First Schedule, the salaried table applies only where your salary exceeds seventy-five per cent of your taxable income. If salary is 75% or less, clause (1), the steeper table for individuals other than salaried individuals, applies to your whole taxable income, salary included.

Applies to: Employees in Pakistan who also earn business profit in their own name, such as a teacher running a tuition academy or a bank officer with a shop, for tax year 2027.

What does the law say?

Section 11 of the Income Tax Ordinance, 2001 says “all income shall be classified under the following heads”: Salary, Income from Property, Income from Business, Capital Gains and Income from Other Sources. Your pay from an employer is under “Salary”. The profit from your side business is under “Income from Business”. Both feed into one taxable income for the year.

Division I of Part I of the First Schedule then gives two rate tables for individuals:

Clause (1) sets the rates for “every individual and association of persons except a salaried individual”, and opens with the words “Subject to clause (2)”.
Clause (2) says: where the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income, the rates in its table apply.

The Ordinance does not define “salaried individual” separately. The working test in the text is the 75% ratio in clause (2).

How do the two tables compare in tax year 2027?

Clause (2), where salary exceeds 75% of taxable income:

Taxable income	Tax
Up to Rs. 600,000	0%
Rs. 600,001 to Rs. 1,200,000	1% of the amount over Rs. 600,000
Rs. 1,200,001 to Rs. 2,200,000	Rs. 6,000 + 11% of the amount over Rs. 1,200,000
Rs. 2,200,001 to Rs. 3,200,000	Rs. 116,000 + 20% of the amount over Rs. 2,200,000
Rs. 3,200,001 to Rs. 4,100,000	Rs. 316,000 + 25% of the amount over Rs. 3,200,000
Rs. 4,100,001 to Rs. 5,600,000	Rs. 541,000 + 29% of the amount over Rs. 4,100,000
Rs. 5,600,001 to Rs. 7,000,000	Rs. 976,000 + 32% of the amount over Rs. 5,600,000
Above Rs. 7,000,000	Rs. 1,424,000 + 35% of the amount over Rs. 7,000,000

Clause (1), in every other case:

Taxable income	Tax
Up to Rs. 600,000	0%
Rs. 600,001 to Rs. 1,200,000	15% of the amount over Rs. 600,000
Rs. 1,200,001 to Rs. 1,600,000	Rs. 90,000 + 20% of the amount over Rs. 1,200,000
Rs. 1,600,001 to Rs. 3,200,000	Rs. 170,000 + 30% of the amount over Rs. 1,600,000
Rs. 3,200,001 to Rs. 5,600,000	Rs. 650,000 + 40% of the amount over Rs. 3,200,000
Above Rs. 5,600,000	Rs. 1,610,000 + 45% of the amount over Rs. 5,600,000

Worked example (illustrative figures)

Kamran is a bank officer in Lahore who runs a tuition academy in the evenings. His salary is Rs. 3,000,000. Assume no deductible allowances and no other income.

Case A: academy profit Rs. 600,000.

Taxable income: Rs. 3,000,000 + Rs. 600,000 = Rs. 3,600,000.
Salary share: Rs. 3,000,000 / Rs. 3,600,000 = 83.3%. That exceeds 75%, so clause (2) applies.
Band: Rs. 3,200,001 to Rs. 4,100,000. Amount over Rs. 3,200,000: Rs. 400,000.
Tax: Rs. 316,000 + 25% of Rs. 400,000 = Rs. 316,000 + Rs. 100,000 = Rs. 416,000.

Case B: academy profit Rs. 1,200,000.

Taxable income: Rs. 3,000,000 + Rs. 1,200,000 = Rs. 4,200,000.
Salary share: Rs. 3,000,000 / Rs. 4,200,000 = 71.4%. That does not exceed 75%, so clause (1) applies to the whole Rs. 4,200,000.
Band: Rs. 3,200,001 to Rs. 5,600,000. Amount over Rs. 3,200,000: Rs. 1,000,000.
Tax: Rs. 650,000 + 40% of Rs. 1,000,000 = Rs. 1,050,000.

Had clause (2) applied in Case B, the tax on Rs. 4,200,000 would have been Rs. 541,000 + 29% of Rs. 100,000 = Rs. 570,000. Crossing the 75% line cost Rs. 480,000.

Where is the line? With a salary of Rs. 3,000,000, salary stays above 75% only while business profit is below Rs. 1,000,000. At exactly Rs. 1,000,000 of profit, salary is exactly 75% of Rs. 4,000,000, which does not exceed 75%.

What if I have rent or other income too?

The ratio is salary against taxable income, so any income inside taxable income lowers the salary share. Section 4(4) says “Certain classes of income (including the income of certain classes of persons) may be subject to” separate taxation or final tax, and section 4(5) keeps that income out of the computation of taxable income. Income of that kind does not enter the ratio. Which of your other receipts fall in that group depends on the provision that taxes them.

What about the employer’s deduction?

Section 149 requires the employer to deduct tax “on the estimated income of the employee chargeable under the head “Salary””. The deduction is worked out on salary alone. If your business income moves you onto clause (1), the tax on the return will be higher than what was deducted from salary.

Common mistakes

Splitting the tables. Salary is not taxed on clause (2) while profit goes on clause (1). One table covers the whole taxable income.
Testing against total receipts. The 75% test uses taxable income, which for the business part is profit, not sales.
Assuming a job always means the salaried table. A job alone does not decide it. The ratio does.

What to check in the official text

Read clauses (1) and (2) of Division I of Part I of the First Schedule in the official PDF amended to 30 June 2026, since our site copy leaves out the tables. Read section 4(4) and (5), section 11 and section 149(1) in the Ordinance.

Where this comes from in the law

Income Tax Ordinance, 2001, First Schedule, Part I, Division I, clause (2)
As amended to 2026-06-30. Download official PDF
Income Tax Ordinance, 2001, First Schedule, Part I, Division I, clause (1) (rate table)
As amended to 2026-06-30. Download official PDF
Income Tax Ordinance, 2001, section 4 (Tax on taxable income)
Certain classes of income (including the income of certain classes of persons) may be subject to
As amended to 2026-06-30. Download official PDF
Income Tax Ordinance, 2001, section 11 (Heads of income)
all income shall be classified under the following heads
As amended to 2026-06-30. Download official PDF
Income Tax Ordinance, 2001, section 149 (Salary)
on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made
As amended to 2026-06-30. Download official PDF