Pakistan Payroll & Tax Regulations

A. Update

The Pakistan government has announced an increase in the Minimum Wage in the Budget 2024-2025 for all the provinces, namely Punjab, Sindh, Balochistan, Khyber Pakhtunkhwa and Islamabad Capital Territory region, for unskilled workers from PKR 32,000 to PKR 37,000 per month.

Accordingly, both the employee and employer’s monthly contribution towards Employees’ Old-Age Benefits (EOB) will now be calculated on the revised minimum wage as follows:

• Employer’s share of contribution = 5% of the minimum wages: 37,000*5%= PKR 1,850
• Employee’s share of contribution = 1% of the minimum wages: 37,000*1%= PKR 370

A. Update

On June 12, 2024, the Honl. Finance Minister Mr. Muhammed Aurangzeb presented the budget proposals for the fiscal year 2024-2025. The Budget has proposed revised tax rate table for salaried individuals as under:

A. Update

Employees’ Old-Age Benefits Institution B&C-III Department, via Notification No.SO (L-II) 13-03/2016-I dated November 02, 2023, amends the minimum wage of Sindh region for unskilled workers from Rs.25,000 to Rs.32,000 per month.

Hence, both the employee & employer contribution to Employees’ Old-Age Benefits Institution (EOBI) will now be calculated on the revised minimum wage. The monthly EOBI contribution for Sindh Region will be as follows:

•  Employer’s share of contribution, i.e., 5% of the minimum wages: 32,000*5%= 1,600
• Employee’s share of contribution, i.e., 1% of the minimum wages: 32,000*1%= 320

A. Update

Employees’ Old-Age Benefits Institution B&C-III Department, via Notification No.SO (D.B) MW/2011 dated September 19, 2023, amends the minimum wage of Punjab region for unskilled workers from Rs.25,000 to Rs.32,000 per month.

Hence, both the employee & employer contribution to Employees’ Old-Age Benefits Institution (EOBI) will now be calculated on the revised minimum wage. The monthly EOBI contribution for Punjab Region will be as follows:

• Employer’s share of contribution, i.e., 5% of the minimum wages: 32,000*5%= 1,600
• Employee’s share of contribution, i.e., 1% of the minimum wages: 32,000*1%= 320

A. Update

The Finance Bill 2023 has received President assent on June 26, 2023, and published in the official Gazette of Pakistan as Finance Act, 2023 (‘the Act’). The Act published provides for revised tax rate tables for salaried individuals as under:

The amended tax tables majorly target high salaried individuals as they are burdened with an additional tax burden of 2.5% starting from the new financial year.

A. Update

The Finance Bill for 2022 that was presented to the parliament has been approved by the President on June 30,2022 and published in the official Gazette of Pakistan. Below are the significant payroll related amendments

Change in Income tax slabs for salaried individuals

In the amended act, tax rates have been increased for individuals earning higher salary income i.e., with annual taxable income more than PKR 2.4 million predominantly to tackle the current economic situation that too without much repercussion on the low salaried individuals.

Tax credits and Deductible allowance no longer allowed for the below investments

• Deductible allowance for Profit on debt (section 60c)
• Tax credit for investment in shares and Insurance (section 62)
• Tax credit for investment in health insurance (section 62A)

Resident Individual

As per the amendment, citizen of Pakistan does not present in any other country for more than one hundred and eighty-two days during the tax year or not a resident taxpayer of any other country will also be considered as Resident individual from now.

Deduction of tax at source

Previously every employer at the time of payment of salary to employees can provide adjustment for tax credits under section 61,62, 63 and 64, but as per the amendment tax credit under section 62 has been removed and cannot be adjusted.

A. Update

Employees’ Old-Age Benefits Institution B&C-III Department, via circular no.-01/2021-22 amends the minimum wage for unskilled workers as Rs.20,000.

Hence, both the employee & employer contribution to Employees’ Old-Age Benefits Institution (EOBI) for Punjab region will now be calculated on the revised minimum wage. The monthly EOBI contribution for Punjab Region will be as follows:

• Employer’s share of contribution, i.e., 5% of the minimum wages: 20000*5%= 1000
• Employee’s share of contribution, i.e., 1% of the minimum wages: 20000*1%= 200

A. Update

On 9 July 2021, the Government of Sindh Labour & Human Resources, vide Notification No. L-II-13-3/2-16, declares the minimum wage to be Rs. 25,000. Hence, the maximum salary base for Social Security Institution (SESSI) contribution is increased to Rs. 25,000.
The Sindh Employees Social Security Institution further announced to increase the monthly employer’s contribution rate to 7% from 6%.

On 30 June 2021, the Government of Punjab Labour & HR Department, vide Notification No. SO(D-II) MW/2011 (P-V), declares the minimum wage to be Rs.22,000. Hence the maximum salary base for PESSI contribution is increased to 22,000.