What is an income tax slab?

How a slab table works

Tax is worked out on the year’s taxable income, not on a single month. Find the slab the annual figure falls in, then add the slab’s fixed amount to its rate on the part of income above its lower limit. In tax year 2026-27, under the Finance Act, 2026, the first Rs 600,000 is not taxed, and the top slab charges 35% on income above Rs 7,000,000.

Because each slab’s fixed amount already covers the slabs beneath it, moving into a higher slab only raises the rate on the income inside the new slab. A raise never makes take-home pay fall.

The table applies to a salaried individual: someone whose salary is more than 75% of their taxable income. A business owner who also draws a salary may be taxed on a different table.

A worked example for 2026-27

A salary of Rs 250,000 a month is Rs 3,000,000 a year. That falls in the slab from Rs 2,200,000 to Rs 3,200,000, so the tax is the slab’s fixed Rs 116,000 plus 20% of the Rs 800,000 above its lower limit: Rs 276,000 for the year, or Rs 23,000 withheld each month if the salary stays the same all year.

An employer withholds on a projection of the whole year, so a mid-year raise or a bonus changes the deduction from that month on — annualised withholding explains why. The salary tax calculator runs the same sum for any salary and every tax year it holds.

Slab tables in Ledgr

In Ledgr a tax regime is a slab table with an annual-projection method, and Pakistan’s FBR salaried regime for 2026-27, on a July tax year, is the built-in reference. When a Finance Act changes the table, the new slabs are a setting finance edits rather than a code release, and each payslip line shows how its tax was computed.