Salary & Income · Section 103 · Tax Year 2026-2027 slabs
Foreign Tax Credit Calculator
Taxed abroad and resident here? Credit is the lesser of the foreign tax paid and the Pakistan tax on that same income — so a high foreign rate is not fully relieved. See the credit, the top-up, and what is lost.
Step by step
How the credit is capped
Tax the worldwide total
Pakistan-source plus foreign-source income, on the slab schedule for your income type.
Find the average rate
Total Pakistan tax divided by total income — not your top marginal rate.
Apply it to the foreign slice
That is the Pakistan tax attributable to the foreign income, and the ceiling on relief.
Credit the lesser figure
Foreign tax paid, or that ceiling. Anything above the ceiling is unrelieved and not refunded.
Reading the result
Relief is capped at the Pakistan tax on that income
The credit is the lower of what you paid abroad and what Pakistan charges on the same income. Where the foreign rate is higher, the excess is not refunded — it simply goes unrelieved. Pakistan does not repay another country's tax.
That makes the credit protection against double taxation, not a mechanism for recovering foreign tax. Someone taxed heavily abroad still ends up out of pocket relative to purely domestic income.
Only for residents
A non-resident is not taxable here on foreign income in the first place, so there is nothing to relieve. The credit only matters once you are resident, which is decided year by year on a day count.
The residency status calculator settles that question first.
A treaty may do better
Where Pakistan has a double taxation agreement with the country concerned, the treaty may reduce the foreign withholding at source or allocate taxing rights differently. Claiming treaty relief before the income is paid is usually better than claiming a credit afterwards, because it prevents the over-deduction rather than compensating for it.
Where this stops
This applies the cap to figures you supply. Converting the foreign tax and income into rupees requires a defensible exchange rate, and the evidence — the foreign assessment or withholding certificate — is what supports the claim.
FAQs
Foreign tax credit FAQs
Who can claim a foreign tax credit?
A resident of Pakistan, on foreign-source income that has already borne tax abroad. Residency is the gate: a non-resident is not taxed in Pakistan on foreign-source income in the first place, so there is nothing to relieve. Check your status before anything else — the 183-day test decides it.
How much credit do I actually get?
The lesser of the foreign tax you paid and the Pakistan tax attributable to that foreign income. The second figure is worked out by applying your average Pakistan rate to the foreign slice, not your top marginal rate. So if the foreign country taxed you at 30% and your average Pakistani rate on the same income is 16%, relief stops at 16% — the balance is unrelieved.
What happens to the unrelieved excess?
It is not refunded, and relief under this section is worked out separately for each head of income. Excess credit that cannot be used generally cannot be carried forward, so it is a real cost rather than a timing difference. The calculator shows it as a distinct figure for that reason.
Is a treaty better than this credit?
Often, yes. Where Pakistan has an agreement for the avoidance of double taxation with the other country, the treaty can cap the rate the source country may charge, or allocate taxing rights outright, which is a better outcome than paying full foreign tax and clawing part of it back. Claim under the treaty first, then use this credit for whatever remains.
What proof do I need?
Evidence that the foreign tax was actually paid — the foreign return, assessment or withholding certificates, and the payment record. A deduction shown on a payslip is not by itself proof of tax paid to a foreign government, and a credit claimed without support is the first thing to be disallowed.
Which exchange rate should I use?
Convert both the foreign income and the foreign tax at the rate applicable when they arose, and use the same basis for both. Converting the income at one rate and the tax at another quietly changes your credit.
Does a remittance from abroad count as foreign income?
No. A remittance is a movement of money, not a head of income, and sending your own funds home is not a taxable event. Foreign-source income means income earned abroad — salary, business profit, rent, dividends. If your question is really about remittances, use the foreign remittance checker instead.
Is this a filing figure?
It is a well-formed estimate of the credit on one block of foreign income against slab tax for Tax Year 2026-2027. A return also brings in other credits, exempt income, minimum tax and any treaty position, and relief is computed head by head. Use it to size the relief, not to file.
Related tools
Sure you are resident for tax?
The whole credit turns on it — a non-resident is not taxed here on foreign income at all.
Open Residency Status Calculator