Many salaried employees in Pakistan pay more tax than they need to simply because they are unaware of the exemptions and deductions available to them. This guide covers all legally allowed tax exemptions for salaried persons in 2025-26.
Complete List of Tax Exemptions — Salaried Employees 2025-26
| Exemption Type | Limit / Amount | Condition |
| Medical Allowance | Up to 10% of basic salary | Must be part of employment contract |
| Conveyance Allowance | PKR 2,500 per month | For official duty transport |
| Leave Fare Assistance (LFA) | Once per year — actual cost | Air or rail travel only |
| Gratuity (Approved Fund) | Fully exempt | Must be from approved gratuity fund |
| Provident Fund Employer Contribution | Up to 1/10th of salary | Recognized provident fund |
| House Rent from Employer | 45% of basic salary or PKR 360,000 | Accommodation provided by employer |
| Pension from Govt or Approved Fund | Fully exempt | Pakistan-source pension only |
| Education Allowance | Up to PKR 1,800/month per child, max 3 children | For employee’s children |
| Zakat Deducted at Source | Full amount | Must be deducted by bank or employer |
| Donations to Approved NPOs | Up to 30% of taxable income | NPO must be FBR-approved |
Senior Citizens Tax Benefit
Pakistani citizens aged 60 years or above are eligible for a 50% reduction in their income tax liability. This is one of the most significant but underutilized exemptions. If you or a family member is 60+, ensure this benefit is claimed when filing the tax return.
Women Taxpayer Benefit
Women taxpayers in Pakistan are entitled to a 25% reduction in their income tax liability. This incentive was introduced to encourage women’s participation in the formal economy and remains applicable in tax year 2025-26.
How to Claim Tax Exemptions
- Inform your employer’s HR/payroll department about eligible exemptions
- Provide supporting documents (e.g., medical bills, conveyance receipts)
- Ensure exemptions are reflected in your salary slip
- Verify in your employer’s tax certificate
- Declare all exemptions correctly in your annual FBR tax return on IRIS portal
Note: Always keep supporting documents for claimed exemptions. FBR may require proof during audit.