Your salary slip explained: basic pay, allowances, tax and deductions in Pakistan
What each line on a Pakistani payslip means: basic, house rent, medical and other allowances, what is taxed, and tax, EOBI and PF deductions.
Work it out with the Provident fund calculator →
A salary slip has two halves: earnings at the top (basic pay and allowances) and deductions below (tax, EOBI, provident fund and so on). Once you know what each line means, you can check for yourself whether the right tax is being taken, which allowance is sheltered from tax, and why your take-home is lower than you expect. All the figures below use the 2026-27 tax slabs, worked out with our salary tax calculator.
A sample payslip
| Earnings | Amount | Tax |
|---|---|---|
| Basic pay | Rs 90,000 | Taxable |
| House rent allowance | Rs 40,500 | Taxable |
| Utilities allowance | Rs 9,000 | Taxable |
| Medical allowance | Rs 9,000 | Exempt up to 10% of basic* |
| Conveyance allowance | Rs 1,500 | Taxable |
| Gross pay | Rs 150,000 | Taxable: Rs 141,000 |
| Deductions | Amount |
|---|---|
| Income tax | Rs 5,010 |
| EOBI (employee’s 1%) | Rs 400 |
| Provident fund (10% of basic) | Rs 9,000 |
| Total deductions | Rs 14,410 |
| Net pay | Rs 135,590 |
* Where the employer provides no free medical treatment or reimbursement. EOBI is taken here as 1% of a Rs 40,000 minimum wage; the figure on your slip depends on the minimum wage EOBI applies.
Every earnings line
- Basic pay: the most important line. Provident fund, many gratuity calculations and the medical allowance exemption all run off it. Under Punjab’s Labour Code the basic wage itself cannot be below the minimum wage; provincial rates are in our minimum wage guide.
- House rent and utilities: often the biggest allowances, and fully taxable. Section 12(2)(c) names rent and utilities allowances as part of salary.
- Medical: the one common allowance with an exemption. If your terms of employment give no free treatment or reimbursement, a medical allowance up to 10% of basic pay is exempt. If you get reimbursement instead, that is exempt (with the hospital or clinic’s NTN and bills attested by the employer) and the allowance is taxable. The Finance Act 2026 did not change this clause.
- Conveyance or transport: taxable. The law excludes only an allowance spent solely in performing your duties, and says a fixed monthly amount or a percentage of salary does not count as one.
- Overtime, bonus, leave encashment, commission: all salary, all taxable. Check overtime rates on the overtime calculator.
- Employer’s provident fund contribution: often shown separately, or not at all, because you do not receive it in cash. It is tax-free up to 10% of basic pay or Rs 150,000 a year, whichever is lower; see the provident fund guide.
Every deduction line
- Income tax: under section 149 your employer works out your average rate on the estimated taxable salary for the year, deducts it monthly and corrects any difference during the year. The slabs are in our tax slabs guide.
- EOBI: your share is 1% of the minimum wage, while the employer pays 5% itself and may not take it from your pay. These contributions become your pension later; see the EOBI pension guide.
- Provident fund: a fixed percentage of basic pay. It is your saving, not a cost, but it does not reduce your taxable salary.
- Loans, advances and others: section 168 of Punjab’s Labour Code allows only the deductions it lists, such as statutory contributions, income tax, court orders, fines, absence from duty, loss caused by your neglect, housing or transport the employer provides, recovery of advances, and provident fund subscriptions and loan repayments. If there is a deduction you do not recognise, ask HR to explain it in writing.
The example worked through
- Of the Rs 150,000 gross, the medical allowance of Rs 9,000 is exempt (10% of the Rs 90,000 basic), so taxable salary is Rs 141,000 a month, or Rs 1,692,000 a year.
- That falls in the Rs 1,200,000 to Rs 2,200,000 slab: Rs 6,000 plus 11% of income above Rs 1,200,000 = Rs 60,120 a year, or Rs 5,010 a month.
- Without the medical exemption the tax would be Rs 6,000 a month, so the exemption saves Rs 990 every month.
- Tax, EOBI and provident fund together take Rs 14,410, leaving Rs 135,590 in hand.
To see what a raise or a new job offer really changes, use the salary increment calculator.
What to check on your slip
- Does the basic pay match your appointment letter, and did your raise go into basic or only into allowances? A rise in allowances does not increase your provident fund or gratuity.
- Is the tax close to what our calculator shows? If it is far off, ask HR what income they included.
- Is EOBI deducted every month? If it is, check that your name is in EOBI’s online record.
- At the end of the year, get a tax deduction certificate from your employer; you need it to file your return. See how to become a filer.
- When you leave, keep your last slips, the provident fund statement and the final settlement; work out gratuity on the gratuity calculator.
Frequently asked questions
Why did my tax go up after I got a bonus?
Section 149 makes your employer deduct tax each month at your average rate on your estimated salary for the whole tax year, adjusting for any earlier over- or under-deduction. A bonus raises the estimated annual salary, so the deduction in that month and the remaining months of the year goes up.
Is house rent allowance tax-free?
No. Section 12(2)(c) of the Income Tax Ordinance lists rent, utilities, cost of living, education, entertainment and travel allowances as part of taxable salary. The only allowances left out are those spent solely in performing your duties, and a fixed monthly amount does not qualify.
I get medical reimbursement and a medical allowance. Are both exempt?
Normally only one. Clause 139 of the Second Schedule exempts free medical treatment or reimbursement under your terms of employment (with the hospital’s NTN and bills attested by the employer), and exempts a medical allowance up to 10% of basic only where such free treatment or reimbursement is not provided. If you get reimbursement, the allowance is taxable.
Why is my take-home lower than gross pay minus tax?
Because of other deductions: your EOBI contribution, your provident fund share, and any loan or advance repayments. In the example on this page they come to Rs 9,400 a month on top of the tax.
Does my employer have to give me a payslip?
In Punjab, yes. Section 165(15) of the Labour Code 2026 requires an itemised payslip with every monthly payment, showing basic wage, allowances, gross pay, deductions, net pay, overtime and bonus, and your leave balances. Wherever you work, ask for one: it is your main evidence in any pay dispute.
Calculators for this guide
- Provident fund calculatorProject your provident fund at retirement: your and your employer’s contributions, yearly profit, and the tax-free limits of the Sixth Schedule.
- Salary tax calculatorCalculate your monthly income tax and take-home salary under the 2026-27 budget, and see how much you save compared with 2025-26.
- Salary raise & job offer calculatorIs your raise or job offer worth it? See the extra take-home pay after 2026-27 income tax, the raise after inflation, and the salary you need just to keep up.
- Gratuity calculatorCalculate the gratuity due at the end of your job in Pakistan from your last salary and years of service.
Sources
- Income Tax Ordinance 2001 as amended up to 30 June 2026 (FBR): section 12 (salary), section 149 (tax deduction from salary), Second Schedule Part I clause 139 (medical), Sixth Schedule Part I (provident fund)
- FBR Circular No. 02 of 2026-27 (8 September 2026): salaried tax rates for tax year 2027
- EOBI home page: employee contribution of 1% of minimum wages
- Punjab Labour Code 2026 (Act IX of 2026): sections 165 (payment and payslip) and 168 (permitted deductions)
This guide explains the rules for general information. It is not official, legal or tax advice. Rules change, so check the official source or a qualified professional before acting. See how we check our information.