Written by Shahnawaz Akhter If you are a salaried individual earning above the threshold of Rs. 600,000 annually, understanding how the Federal Board of Revenue (FBR) calculates your income is essential for accurate tax return filing in tax year 2026. Under Section 149 of the Income Tax Ordinance, 2001, your employer plays a central role in determining and deducting your salary tax. 🧾 How Salary Tax is Calculated (Section 149) FBR does not directly calculate your salary tax each month. Instead, your employer estimates your annual income and deducts tax at source. 💡 Key Formula Used by FBR: Average Tax Rate = A / B • A = Tax payable on your estimated annual salary • B = Your estimated salary income (including applicable adjustments) 👉 This means: • Your employer estimates your total yearly income • Then applies a progressive tax rate • And deducts tax monthly based on an average rate 👨💼 What Employers Are Responsible For Under Section 149(1), every employer must: • Deduct tax at the time of salary payment • Use the average tax rate • Adjust for: o Previously deducted tax o Excess or short deductions o Tax credits (e.g., under Sections 61 & 63) 👉 This ensures your tax is evenly distributed throughout the year instead of a lump sum at year-end. 🔄 Adjustments in Salary Tax FBR allows employers to adjust deductions during the year based on: • Tax already withheld • Any excess or deficiency in previous deductions • Failure to deduct tax earlier 📌 These adjustments help avoid overpayment or underpayment when filing your final return. 💰 Special Rule for High Pension Income Under Section 149(1A): • If a retired employee under age 70 earns pension above Rs. 10 million annually • Tax is deducted only…