Payroll Tax Slab

This is the income tax table as the Finance Act publishes it: a set of income bands, each with a fixed amount and a percentage on the income above the band floor. The payroll run finds the band a man's yearly taxable income falls in, works out his tax for the year, and spreads what is left over the months remaining.

Where

Payroll › Setup › Payroll Tax Slab

Who uses it

The implementation consultant, once a year when the Finance Act changes

When

Before the first payroll run of a tax year

Needs first

The income tax Wage Type

What it is for

Income tax is not worked out month by month from a month's pay. It is worked out for the year and then collected in instalments, and this screen holds the table the year is worked out from.

The run does it in this order. It annualises the man's taxable pay, which is every wage type on the earning side with Taxable ticked. It finds the one slab line whose Lower Limit and Upper Limit his yearly figure falls between. Then, for that line:

1. Take the yearly taxable amount and subtract the line's Exempt Amount. That leaves the income above the band floor.
2. Apply the line's Tax Percentage to what is left.
3. Add the line's Fixed Rate, which is the tax already accumulated by the bands below this one.
4. Subtract the tax already deducted from him earlier in the tax year.
5. Divide what remains by the number of periods still left in the tax year, and round it by the method and precision on the header.

If the result comes out at zero or less, nothing is deducted. That is what makes the system self correcting: a man who gets a raise in February has his new yearly figure taxed, his tax already paid taken off, and the difference spread over the months that are left.

Two fields decide where the money goes and whether it goes at all. The Wage Type on the header is the line the tax is deducted through, and the run will not produce a tax line without it. The man's slab table does not come from the Payroll Tax Group: it comes from the tax zone named on his Employee Policy Profile, and the periods left in the year come from the tax fiscal calendar named on the same profile.

Every field, in plain words

Basic Data

Field	What it means	What to put in it	Notes
Payroll Tax Slab	The code for this table	SAL2627 for the salaried table of tax year 2026-27	Required. Name it after the tax year, you will be creating a new one every July
Name	How the table reads in a list	Salaried slabs 2026-27
Wage Type	The wage type the income tax is deducted through	5000 Income Tax	Pick from the list. Without it the run produces no tax line at all
Rounding Method	How the monthly tax amount is rounded	N Round Near	Required. D Round Down, N Round Near, U Round Up
Rounding Precision	How many decimals the rounding keeps	0 to round to whole rupees	Nearly always 0
Date From	The first day of the tax year this table belongs to	01-Jul-2026	For your own reference. The run uses the table the tax zone names and does not check these dates
Date To	The last day of that tax year	30-Jun-2027	Same, for reference

Slabs

One line per band of the published table, in order, lowest first.

Field	What it means	What to put in it	Notes
Line #	The line number	Fills itself	Leave it
Lower Limit	The lowest yearly taxable income this band covers	1200001	A band is matched when the yearly figure falls between this and the Upper Limit
Upper Limit	The highest yearly taxable income this band covers	2200000	The top band needs an upper limit high enough to catch any salary. A figure above every upper limit matches no band and is taxed nothing
Exempt Amount	The part of the income this band does not charge its percentage on, which is the band floor	1200000	Normally the same as the previous band's upper limit
Fixed Rate	The flat tax the bands below this one have already accumulated	30000	It is an amount of tax, not a rate, despite the name
Tax Percentage	The rate charged on the income above the Exempt Amount	15

A Pakistani example

The salaried table as it is usually published goes in like this. Six lines, lowest band first.

Lower Limit	Upper Limit	Exempt Amount	Fixed Rate	Tax Percentage
0	600000	0	0	0
600001	1200000	600000	0	5
1200001	2200000	1200000	30000	15
2200001	3200000	2200000	180000	25
3200001	4100000	3200000	430000	30
4100001	999999999	4100000	700000	35

Read the third line the way the run reads it. A supervisor on 150,000 a month has a yearly taxable figure of 1,800,000, which falls between 1,200,001 and 2,200,000. Subtract the Exempt Amount of 1,200,000, leaving 600,000. Fifteen percent of that is 90,000. Add the Fixed Rate of 30,000 and his tax for the year is 120,000. If three months of the tax year have already taken 30,000 off him, the remaining 90,000 is spread over the nine months left, so 10,000 a month, rounded to the nearest rupee.

How to configure it

1. Create the income tax Wage Type first, direction C Credit, if it does not exist.
2. Open the screen with the published slab table in front of you. Create one record per table per tax year.
3. Fill the header: code, name, the income tax wage type, Rounding Method N Round Near and Rounding Precision 0.
4. Add one line per band, lowest first. Lower Limit and Upper Limit straight from the published table.
5. Set Exempt Amount on each line to that band's floor, which is the previous band's upper limit.
6. Set Fixed Rate to the fixed tax the published table shows for that band, and Tax Percentage to its rate.
7. Give the top band an upper limit far above any salary the client pays. A yearly figure above every upper limit is taxed nothing at all.
8. Check the bands are continuous: each Lower Limit should be one rupee above the Upper Limit below it, with no gap and no overlap.
9. Save, then point the tax zone on the Employee Policy Profile at this table.
10. Run one payroll and check one man by hand against the table before the client sees it.

Scenarios

"The Finance Act has changed the slabs"

Create a new record for the new tax year rather than editing last year's. Then point the tax zone at the new table. The dates on the header are for your reference only, so the switch happens when the zone is repointed, not on 1 July by itself.

"Directors are taxed on a different table"

A second slab record, and a second tax zone pointing at it. Which table a man gets is decided by the tax zone on his policy profile.

"A man got a raise in March and his tax jumped"

That is the table working as intended. His yearly taxable figure is now higher, which may have moved him into a higher band, and the extra tax for the whole year has to be collected in the months that are left. The fewer months remain, the larger the monthly correction.

"Our highest paid director is paying no tax"

His yearly taxable figure is above the Upper Limit of the top band, so no band matches him and no tax is calculated. Raise the top band's upper limit.

What it is connected to

• Needs the income tax Wage Type on the header, or no tax line is produced.
• Reached by the payroll run through the tax zone on the Employee Policy Profile. The Payroll Tax Group is not part of that path.
• The number of periods the yearly tax is spread over comes from the tax fiscal calendar on the same policy profile.
• The tax base it is applied to is every Wage Type on the earning side with Taxable ticked, so changing a Taxable tick changes everybody's tax.
• Tax already collected is read from the earlier runs of the same tax year, which is why a correction in one month settles itself over the following ones.

If something looks wrong

• "No tax is being deducted from anybody" - the slab has no wage type on the header, or the tax zone on the policy profile does not point at this slab.
• "The highest earners pay no tax" - their yearly figure is above every Upper Limit, so no band matches. Extend the top band.
• "The tax is far too high for one man" - check his yearly taxable figure. An allowance with Taxable ticked that should not be taxed will inflate it.
• "The tax amount jumps about from month to month" - that is the yearly figure being recalculated and spread over fewer and fewer remaining periods. Check the tax fiscal calendar on the policy profile if the spread looks wrong.
• "Two bands cover the same income" - the limits overlap. Each Lower Limit should be one rupee above the Upper Limit below it.