What is the income tax rate for a private or public limited company in Pakistan for tax year 2027?

A company in Pakistan pays income tax on its taxable income at a flat rate, not on slabs. The rate depends on which of three types of company it is. The figures below come from the Income Tax Ordinance, 2001 as amended to 30 June 2026, which gives the rates for tax year 2027 (income of the year 1 July 2026 to 30 June 2027 for a company on the normal tax year).

What does the law say?

Section 4(1) imposes income tax for each tax year “at the rate or rates specified in Division I or II of Part I of the First Schedule”. Division I holds the slab rates for individuals and associations of persons. Division II holds the rates for companies. Section 4(2) then computes the tax by applying that rate to the taxable income for the year and subtracting any tax credits.

The Table in Division II, as substituted by the Income Tax (Amendment) Act, 2025, reads:

Type of company	Tax year 2025	Tax year 2026	Tax year 2027 and onwards
Banking company	44%	43%	42%
Small company	20%	20%	20%
Any other company	29%	29%	29%

The small company and any other company rows carry a single rate in the Table, so the same figure applies in each year shown.

Which companies fall into each row?

Any other company. This is the ordinary row. Section 80(2)(b) defines “company” widely: a company as defined in the Companies Act, 2017, a body corporate formed under any law in Pakistan, a modaraba, a foreign incorporated body, and several others. A private limited company and a public limited company that are not banking companies and do not meet the small company test both pay 29%. The Table does not separate listed from unlisted companies.

Small company. Clause (59AB) of section 2 defines a small company as a company registered on or after 1 July 2005 under the Companies Act, 2017 which:

• has paid up capital plus undistributed reserves not exceeding fifty million rupees;
• has employees not exceeding two hundred and fifty at any time during the year;
• has annual turnover not exceeding two hundred and fifty million rupees;
• is not formed by splitting up or reconstituting a company already in existence; and
• is not a small and medium enterprise as defined in clause (59A).

All five conditions have to hold. A company registered before 1 July 2005 cannot be a small company under this definition however small it is.

Banking company. The banking row steps down from 44% to 43% to 42% over tax years 2025, 2026 and 2027.

Worked example (illustrative figures)

Three companies each report their taxable income for tax year 2027.

1. Ravi Fabrics (Private) Limited, Faisalabad, an ordinary private company with taxable income of Rs. 80,000,000. Rate 29%. Tax: Rs. 80,000,000 x 29% = Rs. 23,200,000.
2. Margalla Soft (SMC-Private) Limited, Islamabad, registered in 2019, capital and reserves of Rs. 30,000,000, 60 employees and turnover of Rs. 120,000,000, with taxable income of Rs. 10,000,000. It meets every condition in clause (59AB). Rate 20%. Tax: Rs. 10,000,000 x 20% = Rs. 2,000,000.
3. A banking company with taxable income of Rs. 80,000,000 (kept equal to the first example so the rates can be compared). Rate 42%. Tax: Rs. 80,000,000 x 42% = Rs. 33,600,000. The same income in tax year 2026 at 43% would give Rs. 34,400,000.

In each case section 4(2) then subtracts tax credits, and section 4(3) sets the order: foreign tax credit first, then Part X of Chapter III credits, then credits for advance tax paid and tax deducted or collected at source.

What if the rate in Division II is not the whole story?

What if the company has high income? Section 4C imposes super tax at the Division IIB rates on a separately defined income. It is charged on top of the Division II tax, not instead of it. The thresholds are explained on the super tax pages linked below.

What if the company has a loss or very low profit? The minimum tax on turnover can make a resident company pay a percentage of its turnover instead (see the linked page), and section 113C provides that tax payable by a company “shall be higher of the Corporate Tax or Alternative Corporate Tax”. Section 113C(2)(b) sets Alternative Corporate Tax at seventeen per cent of adjusted accounting income. So the Division II rate is the starting point, not always the final figure.

What if the company outgrows the small company limits? The definition is tested on the company’s position, including turnover in the year. Once any condition fails, for example turnover goes above Rs. 250,000,000, the small company rate no longer fits the definition and the any other company row applies.

Common mistakes

• Using the individual slabs for a company. Division I slabs apply to individuals and associations of persons. A company is charged under Division II.
• Assuming a public limited company pays more than a private one. The current Table does not distinguish them. An older version of Division II did, which is why the belief persists.
• Claiming the small company rate for an old company. The definition requires registration on or after 1 July 2005.
• Quoting 44% for a bank in tax year 2027. 44% is the tax year 2025 figure. The Table sets 42% for tax year 2027 and onwards.
• Forgetting super tax and minimum tax. The 29% figure is the Division II rate only.

What to check in the official text

Read section 4, clause (59AB) of section 2 and section 80 in the official PDF of the Ordinance, then the Table in Division II of Part I of the First Schedule. The Table was substituted by the Income Tax (Amendment) Act, 2025, which is not held in this corpus as a separate instrument, so confirm the figures against the official consolidated PDF. Some companies may also have income that is taxed separately or as a final tax under section 4(4) and (5), for example dividends received, and those amounts are not taxed at the Division II rate.