Income tax returns 2025: Tax on pension in Pakistan

Pension income serves as a crucial financial safety net for retirees in Pakistan, with the Tax Ordinance 2001 offering tax exemptions to safeguard retirement benefits, specifically for senior citizens, government employees, and armed forces personnel.

Notably, if you are a pension receiver, then tax is exempted on up to Rs10 million, providing an extensive tax relief.

What is pension income?

Pension income refers to retirement benefits received from employer-sponsored plans or private savings, providing financial security for retirees.

Pension income is generally considered taxable income, but the specific rules and amounts vary in Pakistan.

Categories of pension tax relief

Salaried individual pension from former employers

If you are receiving a pension from a former employer, it is exempt (up to Rs10 million), provided that:

• You are no longer employed by the same organisation or its associate, and
• The payment is strictly a retirement benefit.

Notably, if you get multiple pensions, then only the higher pension is exempt, while others may be taxable.

Armed forces pensions

Pensions received by:

• Pakistan armed forces (Army, Navy, Air Force),
• Federal or provincial government servants, and
• Families/dependents of deceased personnel, are exempt up to Rs10 million annually.

Private pensions (Not from employers)

Private pensions under the Voluntary Pension Scheme Rules, 2005, or pensions not received from past employers, are taxable under Section 39 (Income from Other Sources).

According to the Federal Board of Revenue (FBR), taxpayers can file an income tax return for the fiscal year 2024-25 until September 30.

Taxpayers who have not filed their income tax returns should do so before September 30 to avoid penalties and default surcharges.

Pension tax slab 2025