Your marginal slab rate versus your effective rate.
Marginal rate
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Effective rate
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Tax on next 100,000
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Two numbers, two completely different jobs
People mix up their marginal rate and their effective rate constantly, and the confusion costs real money in planning decisions. Your marginal rate is the slab rate that lands on the next rupee you earn. Your effective rate is the average bite once the whole income has passed through every band, including the tax-free portion. The first answers "is this raise worth chasing"; the second answers "what share of my income actually goes to tax". This tool puts both on screen so you stop guessing.
Pakistan taxes salaried income on a progressive ladder of slabs set by the Federal Board of Revenue (FBR) and rewritten in most years through the Finance Act. That means the slab boundaries and the percentages drift annually. The structure, a series of rising bands with a tax-free floor, is stable and safe to learn; the exact figures are not. Everything quoted below is the rate this calculator applies for the modelled year, and you should confirm the live numbers with the FBR before acting.
Why your marginal rate is never your whole rate
A common mistake is to see "23% slab" and assume nearly a quarter of everything is gone. It is not, because the earlier rupees were taxed lightly or not at all. The tax-free threshold this calculator uses is the first PKR 600,000, taxed at zero. The band above that, up to PKR 1.2 million, is taxed at just 1% as modelled here, a deliberate relief on lower salaries. Only the slice that climbs into a higher band is charged at that higher rate. So a 23% marginal taxpayer almost always has an effective rate far below 23%.
A salary of PKR 3 million, slab by slab
Take the tool's default: a salaried person on PKR 3,000,000 of annual taxable income. Using the rates this calculator applies, the income reaches the 23% band, so the marginal rate is 23%. But stack the slabs and the total tax is only PKR 300,000, which is an effective rate of exactly 10%. The next PKR 100,000 you earned would cost PKR 23,000 in tax, because that money sits in the 23% band. Notice how far apart 23% and 10% are; that gap is the entire point of a progressive system.
| Income slice | Rate applied | Tax on slice |
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The chart shows the same story as a tall marginal bar beside a much shorter effective bar. The headline slab rate looks frightening; the average you actually pay is far gentler.
Salaried and business taxpayers sit on different ladders
The income type toggle is not cosmetic. Pakistan runs a separate, steeper rate card for non-salaried individuals, sole proprietors, freelancers, and Associations of Persons (AOPs), which applies when salary is not the dominant share of income. On the business card the entry band above the tax-free floor starts at 15% rather than 1%, and the top band climbs to 45% as modelled here, against 35% for salaried earners. A freelancer and a salaried employee on identical income can therefore face very different marginal rates. Pick the toggle that matches how the FBR would classify you, and confirm the current slabs for your category.
Who should reach for this tool
This is the calculator to open before you negotiate a raise, weigh a bonus, take on extra freelance work, or decide whether a tax-saving contribution is worth it. The deciding number in all of those is the marginal rate, because it tells you what the last rupee is really worth after tax. One practical tip: the tool computes the slab tax only, without the high-income surcharge that applies once taxable income passes PKR 10 million, so very high earners should treat the marginal figure as the slab rate before that extra charge.
If I move up one slab, does my whole salary get taxed at the higher rate?
No, and this is the single most common fear. Only the rupees that fall inside the higher band are taxed at the higher rate. Everything below keeps its lower rate. Crossing into a new slab never drops your take-home pay; it only means the portion above the boundary is taxed a little harder. A raise is always worth taking.
Does a salary tax deduction save tax at my marginal rate?
Broadly yes. An allowable deduction or eligible investment that reduces taxable income saves tax on that top slice, so it is worth roughly your marginal rate, not your effective rate. That is why high-slab earners gain the most from legitimate reliefs. Confirm which deductions still qualify for your tax year with the FBR, since the list is revised periodically.