Business Income Tax Calculator — Pakistan 2026-27
Income tax on business profit in Pakistan for Tax Year 2027 as a sole proprietor, AOP, small company or company, the 1.25% minimum tax on turnover, super tax, the 10% high-income surcharge, credit for withholding and whether incorporating would cut the bill.
| Taxable profit | — |
|---|---|
| Normal tax | — |
| Minimum tax (1.25% of turnover) | — |
| Super tax (s.4C) | — |
| High-income surcharge (s.4AB) | — |
| Total tax / effective rate | — |
| Less tax withheld by customers | — |
| Balance payable with the return | — |
| Compared with a company | — |
| Profit after tax | — |
In short
Business profit in Pakistan for Tax Year 2027 is taxed at 0% to PKR 600,000, 15% to 1.2m, 20% to 1.6m, 30% to 3.2m, 40% to 5.6m and 45% above for sole proprietors and AOPs (plus a 10% surcharge above PKR 10 million), or a flat 29% for companies (20% small companies), subject to a minimum tax of 1.25% of turnover and super tax above PKR 500 million; PKR 6 million of profit costs a sole trader PKR 1.79 million and a company PKR 1.74 million.
Who this is for: Sole traders, partners, startups and SMEs estimating the year's tax, quarterly advance tax and whether to incorporate.
Business income tax in Pakistan for Tax Year 2027
How a Pakistani business is taxed depends on its form. Sole proprietors and AOPs pay the non-salaried slab rates on profit — nil to PKR 600,000, 15% to 1.2 million, 20% to 1.6 million, 30% to 3.2 million, 40% to 5.6 million and 45% above — plus a 10% surcharge on the tax once income exceeds PKR 10 million. Companies pay a flat 29% (small companies 20%, banks 42%), and shareholders pay 15% on dividends. Either way, minimum tax of 1.25% of turnover applies if it exceeds the normal tax, and the super tax of 8% bites above PKR 500 million of income.
- When to incorporate: at the 45% top slab, a sole trader with PKR 10 million of profit pays about PKR 3.6 million plus surcharge; a company pays PKR 2.9 million and defers the 15% dividend tax until profits are drawn.
- Withholding as minimum tax: the 5–15% deducted by customers under s.153 on goods, services and contracts is a minimum tax for most taxpayers — if it exceeds the computed tax the excess is not refunded.
- Small company status (20%) needs paid-up capital and reserves under PKR 50 million, fewer than 250 employees and turnover under PKR 250 million, and not being a split-off of an existing business.
- Compliance: quarterly advance tax (s.147), sales-tax registration for goods above the threshold, withholding-agent duties for companies and larger AOPs, and the return by 30 September / 31 December.
See also: Pakistan Sales Tax (GST) Calculator, Pakistan Freelancer Tax Calculator.
Assumptions
- Profit = turnover − expenses; sole proprietor taxed on profit + other income at the non-salaried slabs (0/15/20/30/40/45%) less tax on other income; AOP at the slabs (40% cap for professional firms); companies 29% / 20%.
- Minimum tax = 1.25% × turnover if greater than normal tax; super tax 8% of income above PKR 500m; surcharge 10% of tax when non-salaried income exceeds PKR 10m.
- Balance = total − withholding entered (s.153 is treated as minimum tax); company comparison includes the note on 15% dividend tax.
Worked example
Profit PKR 6,000,000 → 1,610,000 + 45% × 400,000 = PKR 1,790,000 normal tax (29.8% of profit). Minimum tax 1.25% × 30m = PKR 375,000 — lower, so not applicable; no surcharge (income under PKR 10 million). As a company the same profit pays PKR 1,740,000 at 29% (PKR 1,200,000 as a small company at 20%), plus 15% on dividends when distributed. Profit after tax PKR 4,210,000.
Frequently asked questions
What is the tax rate for business income in Pakistan?
For sole proprietors and AOPs in Tax Year 2027: 0% to PKR 600,000, 15% to 1.2m, 20% to 1.6m, 30% to 3.2m, 40% to 5.6m and 45% above, plus a 10% surcharge on tax above PKR 10 million of income. Companies pay 29% (small companies 20%).
What is minimum tax in Pakistan?
1.25% of turnover under section 113 (0.25–0.75% for listed sectors), payable when it exceeds the normal tax on profit — common for low-margin traders; the excess can be carried forward three years.
Is it better to register a company or stay a sole proprietor?
Above roughly PKR 4–5 million of profit the flat 29% (or 20% small-company) rate beats the 40–45% top slabs, even after the 15% dividend tax, and limited liability comes with it; below that the slabs are cheaper and compliance lighter.
How are partnership (AOP) profits taxed?
At the AOP level at the slab rates (capped at 40% for professional firms barred from incorporating); the partners' shares are then exempt in their hands but included for rate purposes.
What is super tax?
An additional tax under section 4C of 8% on income above PKR 500 million for most companies and 10% above PKR 150 million for banks, fertiliser and other specified sectors, from Tax Year 2027.
Is withholding tax on my invoices refundable?
Usually not — s.153 deductions on goods, services and contracts are a minimum tax for most taxpayers, so if your customers withheld more than your computed tax the difference is lost (adjustable only for companies in specified cases).
How much is advance tax under section 147?
A quarter of last year's tax (adjusted for turnover) is paid in September, December, March and June; the balance is paid with the return.
Do freelancers pay business tax?
Freelancers exporting IT services are under the 0.25% final regime on receipts (with PSEB registration); local freelance income is business income taxed at the slabs above.
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