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28-Model Extension
Comprehensive summary of latest withholding tax 2026 under Section 149 covering salary, pension, directorship fees, and surcharge to ensure accurate and compliant tax deductions.
Every person responsible for paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in DIVISION I OF PART I OF THE FIRST SCHEDULE on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made including tax under section 4AB after making adjustment of tax withheld from employee under other heads and tax credit admissible under section 61 and 63 during the tax year after obtaining documentary evidence, as may be necessary.
WITHHOLDING TAX DEDUCTION / RATES | ||||
|---|---|---|---|---|
SR | TAXABLE | RATE OF | TAX | APPLICABLE |
1 | Where taxable income does not exceed Rs. 600,000 | Not applicable (0%) | ADJ | Individual |
2 | Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 | 1% of the amount exceeding Rs. 600,000 | ||
3 | Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,200,000 | Rs. 6,000 + 11% of the amount exceeding Rs. 1,200,000 | ||
4 | Where taxable income exceeds Rs. 2,200,000 but does not exceed Rs. 3,200,000 | Rs. 116,000 + 23% of the amount exceeding Rs. 2,200,000 | ||
5 | Where taxable income exceeds Rs. 3,200,000 but does not exceed Rs. 4,100,000 | Rs. 346,000 + 30% of the amount exceeding Rs. 3,200,000 | ||
6 | Where taxable income exceeds Rs. 4,100,000 | Rs. 616,000 + 35% of the amount exceeding Rs. 4,100,000 | ||
These rates apply to salaried individuals, or where an individual's income chargeable under the head ‘Salary’ exceeds 75% of their taxable income. | ||||
Any person responsible for paying pension to a former employee who is below the age of seventy years and deriving pension income during a tax year in which the payment exceeds rupees ten million, shall at the time of payment, deduct tax from the amount which is over and above rupees ten million at the rate provided in DIVISION I OF PART I OF THE FIRST SCHEDULE of the Ordinance, along with tax deducted under section 4AB after making adjustment of tax withheld from former employee under other heads and tax credit admissible under sections 61 and 63 of the Ordinance during the tax year after obtaining documentary evidence, as may be necessary.
WITHHOLDING TAX DEDUCTION / RATES | ||||
|---|---|---|---|---|
SR | TAXABLE | RATE OF | TAX | APPLICABLE |
1 | Where the amount of pension received does not exceed rupees ten million | Not applicable (0%) | FTR | Pension |
2 | Where the amount of pension received exceeds rupees ten million | 5% of the amount exceeding rupees ten million | ||
These rates apply to pension received by an individual from a former employer during a tax year, provided the individual is below 70 years of age. | ||||
Every person responsible for making payment for directorship fee or fee for attending board meeting or such fee by whatever name called, shall at the time of payment, deduct tax at the rate of twenty percent of the gross amount payable.
WITHHOLDING TAX DEDUCTION / RATES | ||||
|---|---|---|---|---|
SR | TAXABLE | RATE OF | TAX | APPLICABLE |
1 | Directorship fee, BoD's meetings or any amount received | 20% of the gross amount payable | FTR | - |
Provided that in case of an individual deriving income chargeable under the head “Salary”, a surcharge shall be payable at the rate of nine percent of the income tax imposed under Division I of Part I of the First Schedule where the taxable income exceeds rupees ten million in a tax year.
SURCHARGE | ||||
|---|---|---|---|---|
SR | TAXABLE | RATE OF | TAX | APPLICABLE |
1 | Where the taxable income exceeds rupees ten million | 9% of tax liability arising on salary | ADJ | Individual |
Under Section 149 of the Income Tax Ordinance, 2001, employers are required to deduct tax at source on salary, pension from former employers, directorship fees, and surcharge where applicable. Salary-based withholding is calculated on the employee’s estimated annual taxable income, after adjusting for tax credits and any prior deductions. Individuals whose income under the head “Salary” constitutes more than 75% of their taxable income fall under these salary tax rates.
For pensioners below 70 years of age, tax is only withheld where pension received from a former employer exceeds Rs. 10 million in a tax year.
Directorship fees and payments for attending Board meetings are subject to a flat 20% withholding rate. Additionally, individuals earning salary exceeding Rs. 10 million are liable to a 9% surcharge on the computed income tax.
Overall, Section 149 ensures proper tax collection at source across salary, pension, directorship fees, and surcharge, enabling accurate compliance within the tax year.
