Pakistan's FY26-27 Budget: Salaried Class Sees Tax Cuts, Slabs Restructured

Pakistan's federal budget for fiscal year 2026-27 offers a tax reduction for salaried individuals, a move not frequently seen in recent years. The finance minister announced lower income tax rates for those earning between Rs2.2 million and Rs7 million annually. The budget also reorganizes the tax slabs from six to eight and removes the surcharge applicable to incomes exceeding Rs10 million.

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The federal budget for 2026–27 has brought the salaried class something it has rarely seen in recent years: a tax cut.

The extent of the relief varies significantly based on an individual's salary. The most substantial benefits are directed towards the middle and upper income segments. The tax rate for income between Rs2.2 million and Rs3.2 million has been reduced from 23% to 20%. Previously, the highest tax rate of 35% applied to incomes above Rs4.1 million; this rate will now only apply to incomes exceeding Rs7 million. New tax brackets of 25%, 29%, and 32% have been introduced in between.

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In his budget speech, the finance minister has announced reduced income tax rates for salaried individuals earning between Rs2.2 million and Rs7 million a year, restructured the slabs from six to eight, and abolished the surcharge that currently applies to annual incomes above Rs10m.

However, individuals earning up to approximately Rs183,000 per month will not experience any changes in their tax obligations. The bottom three tax slabs, including the initial Rs600,000 tax-free threshold, remain unaffected by the new budget measures. The Dawn Income Tax Calculator can be used to determine individual tax liabilities under the new system.

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Most relief has been given to the middle and upper slabs.