Tax on Pension in Pakistan 2026-27

Is pension taxable in Pakistan?

Per reports on budget 2026-27, annual pension income of up to Rs 10 million remains fully exempt from income tax. Reports say pension above that limit is taxed at a flat 5%. The reports do not make clear whether the 5% applies to the whole pension or only the excess, so check the Finance Act text before relying on any figure.

For most pensioners, which means pension well below Rs 10 million a year, no income tax is payable on the pension itself.

Pension combined with other income

Other income such as rent, salary from a new job or bank profit is taxed separately under its own rules. Use the salary tax calculator, the rental income tax calculator and the bank profit tax calculator for those parts.

Gratuity and provident fund

Gratuity and provident fund payouts have their own conditions under the Second and Sixth Schedules of the Income Tax Ordinance, such as approved funds and limits. We have not confirmed 2026-27 figures for these, so ask your employer's HR or a tax advisor and read the FBR notices before assuming a payout is tax free.

Filing a return as a pensioner

Even when no tax is due, filing a return puts you on the Active Taxpayers List, which lowers tax on bank profit, property and vehicle transactions.

What pensioners should check

• Whether your pension is paid from a government or approved scheme.
• Whether you have other income, such as rent or bank profit, that is taxed separately.
• Whether your bank deducts withholding tax on profit, which you may be able to adjust through a return.

Keep your pension payment slips. If a deduction is made, ask for a certificate. This page reports the budget position and will be updated once the Finance Act text is checked for the 5% rule above the exemption limit.

Frequently Asked Questions

Is pension income taxable in Pakistan?

Reports on the 2026-27 budget say pension up to Rs 10 million a year is fully exempt.

What happens above Rs 10 million?

Reports mention a flat 5% above the limit. Check the Finance Act text for how it is applied.

Is gratuity taxable?

It depends on whether it is paid under an approved scheme and on limits in the Second Schedule. Confirm with your employer or a tax advisor.

Should pensioners file a tax return?

It is useful: it puts you on the ATL and gives filer rates on banking and property transactions.