Tax on Overtime Income in Pakistan (TY 2025-26)
Pakistan overtime pay tax TY 2025-26 - how OT is added to salary, slab impact, employer WHT timing, and reconciliation in the IRIS annual return.
Worked example: Rs 25,000 per month
Annual income Rs 300,000 - here's how it would be taxed both ways under Finance Act 2025.
| Taxable income band | Rate | Income in band | Tax in band |
|---|---|---|---|
| Up to Rs 600,000 | 0% | Rs 300,000 | Rs 0 |
| Total slab tax | Rs 0 | ||
Overtime is taxable salary under Section 12
Overtime pay - whether legally mandated under the Factories Act (typically 2× base hourly rate beyond 9 hours/day or 48 hours/week) or contractually agreed - is taxable as salary income. There is no special overtime tax rate in Pakistan. Your annual taxable salary is the sum of base salary plus overtime plus bonuses plus taxable benefits, and the combined figure is taxed under the salaried slab table that runs from 0% (up to PKR 600k) to 35% (above PKR 4.1M).
WHT projection and overtime irregularity
Employers project annual income upfront and deduct Section 149 WHT monthly. Regular overtime (e.g., a factory worker doing predictable extra shifts) is usually built into the projection. Irregular overtime - emergency shutdowns, peak season pushes, ad-hoc weekend work - usually isn't, and the WHT deduction on those months can lag the actual tax due. The gap surfaces in your year-end IRIS reconciliation: declare all salary + overtime, compute slab tax, claim WHT credit, settle the balance.
Worked example: factory worker with seasonal OT
A factory operator earning PKR 60,000 base monthly (PKR 720k annually) sits just above the PKR 600k exemption - small slab tax of about PKR 1,200 annually. Add three months of heavy seasonal overtime totalling PKR 200,000 and annual income jumps to PKR 920k, slab tax to about PKR 5,200. The overtime alone added PKR 4,000 of tax - a 2% effective rate on the OT amount, not a punishing top-bracket hit. Most factory-floor overtime sits in the lowest slabs.
Filing reconciliation
Your employer issues a salary certificate at year-end summarising salary + overtime + bonuses + WHT deducted. Reconcile against your monthly pay slips. If the WHT under-collected (irregular OT not projected), you owe the balance at filing. If it over-collected (you projected high but earned less OT), you get a refund. File the IRIS return before 30 September to maintain ATL status - non-ATL doubles your WHT on every banking transaction.
Frequently asked questions
Is overtime pay taxed differently in Pakistan?
No. Overtime is added to base salary and taxed under the salaried slab table - same rates as regular salary. There is no separate overtime tax rate.
Does my employer deduct tax on overtime?
Yes if it's part of the annual income projection. Irregular overtime sometimes isn't projected and the WHT may lag actual tax due - reconciled in your annual return.
Will overtime push me into a higher slab?
Only if your combined annual income (salary + OT + bonuses) crosses a slab boundary. Most factory and shift overtime sits in the lower slabs where the marginal impact is small.
Can I claim a refund on over-deducted overtime tax?
Yes through your IRIS return. If WHT exceeds actual annual tax due, the system computes a refund once your return is submitted and verified.
Is overtime tax-free up to PKR 600,000?
Up to PKR 600,000 of total annual salary (base + OT + bonuses combined) is exempt. Above that the salaried slabs apply to the full taxable amount.