{"id":262,"date":"2026-10-01T12:26:00","date_gmt":"2026-10-01T12:26:00","guid":{"rendered":"https:\/\/xactlegal.com\/blogs\/?p=262"},"modified":"2026-10-01T12:26:00","modified_gmt":"2026-10-01T12:26:00","slug":"foreign-source-salary-tax-exemption-in-pakistan-tax-year-2027","status":"publish","type":"post","link":"https:\/\/xactlegal.com\/blogs\/2026\/10\/01\/foreign-source-salary-tax-exemption-in-pakistan-tax-year-2027\/","title":{"rendered":"Foreign-Source Salary Tax Exemption in Pakistan – Tax Year 2027"},"content":{"rendered":"\n

The Federal Board of Revenue (FBR)<\/a><\/strong> has clarified the tax treatment of foreign-source salary for Tax Year 2027<\/strong> under Pakistan’s Income Tax Ordinance, 2001.<\/p>\n\n\n\n

Under Section 102<\/strong>, foreign-source salary received by a resident individual<\/strong> is exempt from Pakistani income tax if foreign income tax has been paid on that salary. Tax Year 2027 runs from July 1, 2026 to June 30, 2027<\/strong>.<\/p>\n\n\n\n

Foreign-Source Salary Exemption<\/h2>\n\n\n\n

Section 102 provides that foreign-source salary received by a resident individual is exempt from tax where the individual has paid foreign income tax on that salary<\/strong>.<\/p>\n\n\n\n

Foreign tax is considered to have been paid where the employer has withheld the tax from the salary and paid it to the tax authority of the foreign country where the employment was exercised<\/strong>.<\/p>\n\n\n\n

This provision is particularly relevant for Pakistani residents working for overseas employers or earning employment income from services performed outside Pakistan.<\/p>\n\n\n\n

Foreign Tax Credit for Other Income<\/h2>\n\n\n\n

The exemption under Section 102 specifically concerns foreign-source salary<\/strong>. Other foreign-source income that remains taxable in Pakistan may qualify for a foreign tax credit under Section 103<\/strong>.<\/p>\n\n\n\n

The credit is generally limited to the lower of:<\/p>\n\n\n\n