Salary Slip Deductions Explained in Pakistan (2026 Guide)
Your salary slip answers one question: where did the difference between your offered salary and the money that reached your bank account go? Every line on the slip is either something you earned, something your employer added, or something deducted by law or by agreement. Once you can read those three groups, you can spot errors in under five minutes.
The Three Sections of Every Slip
1. Earnings — what you were paid for the month. This is your gross salary for that month. It usually starts with basic pay, then adds allowances: house rent allowance, conveyance or transport allowance, medical allowance, and any special, shift, or overtime allowance that applies to you. Some employers also show arrears here — pay from an earlier month that was held back and is now being released.
2. Deductions — what was taken out. This is the section most people ignore, and it is the one that matters. The common deductions in Pakistan are income tax, EOBI contribution, provident fund contribution, and any loan or advance recovery. Each one is explained below.
3. Net pay — what actually reaches you. Gross salary minus total deductions equals net pay. This figure should match the amount credited to your bank account. If it does not, that mismatch is the first thing to raise with your HR or payroll department.
Basic Pay: The Number Everything Else Hangs On
Basic pay is the core of your salary, and several other figures are calculated from it. Provident fund contributions are usually a percentage of basic pay, not of total salary. Gratuity and some leave encashment calculations also start from basic pay. That is why two people with the same total salary can have different provident fund deductions — their basic pay split is different. When you negotiate a salary, always ask what portion is basic pay, because it affects your long-term benefits, not just this month cash.
Allowances: Not All of Them Are Taxed the Same Way
Allowances are payments on top of basic pay for a specific purpose. House rent allowance covers housing costs, conveyance covers travel to work, and medical allowance covers health expenses. Some allowances are fully part of your taxable income, while others have specific tax treatment under the current income tax rules. Do not assume an allowance is tax-free just because it has a separate line — check the taxable-income figure on your slip, which is the number your income tax was actually calculated on.
Income Tax: Calculated Yearly, Deducted Monthly
This is the deduction that confuses most people, because it moves during the year. Income tax on salary is worked out on your estimated income for the full tax year, using the current FBR salaried tax slabs, and then divided into twelve monthly deductions. That is why your tax deduction can change mid-year: if your salary rises, an allowance changes, or a bonus is paid, your estimated annual income changes and the monthly figure is adjusted to match. A bonus month often shows a higher tax deduction for exactly this reason — the bonus pushed your annual estimate up.
If your employer deducts tax every month but you never file a return, you are still a taxpayer for withholding purposes, and filing keeps your filer status active, which lowers withholding rates on other transactions. Keep your monthly slips: they are the record you need when filing. To estimate your own tax, see our Salary Tax Deduction Calculator and FBR Income Tax Slabs Explained page.
EOBI: A Small Deduction with a Long-Term Payoff
EOBI (Employees Old-Age Benefits Institution) appears as a small fixed monthly deduction on many private-sector slips. It is a social security contribution: a small amount from the employee and a larger share from the employer, which builds entitlement to a pension after retirement, subject to EOBI eligibility rules on age and years of contribution. The amount is modest, but missing EOBI entries matter — if your employer is registered with EOBI and the deduction is absent, your contribution record may have a gap. Ask HR for your EOBI registration status if the line is missing and your colleagues have it. You can also check the contribution side with our EOBI Contribution Calculator.
Provident Fund: Your Money, Held for You
Provident fund is a savings deduction, not a tax. A percentage of your basic pay is deducted each month, and in most setups your employer matches it with an equal contribution. The combined amount is held in your provident fund account and is paid out when you leave the job or retire, subject to your employer fund rules. Because the employer match is effectively extra pay, a job with a provident fund is worth more than the same cash salary without one. Check that the fund balance grows every month — a deduction that never shows up in your fund statement is a red flag worth raising immediately. See our Provident Fund Calculator for the growth side.
Loan and Advance Recovery: The Deduction You Agreed To
If you took a salary advance, a staff loan, or a festival advance, the monthly instalment appears here until the balance is cleared. Two things are worth checking: that the instalment matches the amount you agreed to, and that the deduction stops in the month the loan ends. Over-recovery after a loan is cleared is one of the most common payroll errors, and it is easy to miss if you never compare one month slip with the next.
Other Lines You May See
Absent-day or late-day deductions reduce pay for unpaid leave beyond your entitlement. Gratuity is usually not a monthly deduction — it is an employer liability paid at exit — but some slips show it as an accrual line, which is information, not a cut from your pay. Zakat deduction appears on bank profit, not normally on a salary slip, unless you have specifically authorised a deduction. Anything you do not recognise should be queried, not ignored.
Worked Example (Illustrative Figures Only)
The figures below are a simple illustration of the arithmetic, not current official rates. Take a simple slip with gross salary of Rs 100,000 for the month:
- Basic pay: Rs 60,000
- House rent allowance: Rs 25,000
- Conveyance allowance: Rs 10,000
- Medical allowance: Rs 5,000
- Gross salary: Rs 100,000
- Income tax: Rs 2,500
- EOBI contribution: Rs 370
- Provident fund (employee share): Rs 6,000
- Salary advance recovery: Rs 5,000
- Total deductions: Rs 13,870
- Net pay: Rs 86,130
The provident fund line is not lost money — Rs 6,000 went into your fund, and your employer normally adds a matching share. The advance recovery is also temporary: it ends when the advance is repaid, and your net pay rises by that amount the following month.
The 5-Point Net-Pay Check (Do This Every Month)
- Net pay matches the bank credit. If the credited amount is lower, ask payroll before anything else.
- Tax is in line with last month. A sudden jump without a salary change or bonus needs an explanation.
- EOBI and provident fund appear every month. A missing month is a gap in your record.
- Allowances match your offer letter. An allowance that quietly disappears is a pay cut.
- Loan deductions stop on time. Note the month your advance ends and check that month slip.
If any check fails, raise it in writing with HR or payroll and keep a copy. Most payroll errors are corrected in the next month cycle, but only if they are reported. To build a sample slip of your own, use our Salary Slip Generator and check your take-home figure with our Net Salary Calculator Pakistan.
Frequently asked questions
Why is my net salary much lower than the salary I was offered?
Your offered figure is usually the gross monthly salary, before deductions. Income tax, EOBI, provident fund and any loan recovery are taken out before payment, so net pay is always lower.
What is the EOBI deduction on my salary slip?
EOBI is a social security contribution towards an old-age pension. A small fixed amount is deducted from your pay each month and your employer contributes a larger share, building pension entitlement subject to EOBI age and contribution-year rules.
Is provident fund deduction compulsory, and do I get the money back?
Provident fund applies where your employer runs a fund; it is a percentage of your basic pay, usually matched by an equal employer contribution. The money is held in your fund account and paid out when you leave the job or retire, under the fund rules.
Why did my income tax deduction change when my salary did not?
Income tax is calculated on your estimated income for the full tax year, then spread over twelve months. A bonus, an allowance change, or an arrears payment raises the annual estimate, so the monthly deduction is adjusted even though your basic salary is unchanged.
What should I do if a deduction on my slip looks wrong?
Compare the slip with the previous month and with your offer letter, note the exact line and amount, then raise it in writing with your HR or payroll department and keep a copy. Most errors are corrected in the following month payroll cycle once reported.