Budget 2026–27 Brings Tax Relief for Salaried Class as Government Cuts Income Tax Rates

Pakistan’s federal government has announced significant tax relief measures for the salaried class in the Budget 2026–27, reducing income tax rates across multiple income slabs and removing certain surcharges.

Finance Minister Muhammad Aurangzeb, presenting the budget in the National Assembly, said the government is fully aware of the financial pressures faced by salaried individuals in both public and private sectors.

He said the relief package has been introduced on the instructions of Prime Minister Shehbaz Sharif, with the aim of easing the tax burden and improving disposable income for middle-income earners.

Reduced Income Tax Slabs Announced

According to the budget proposals, tax rates have been reduced in four major income brackets:

For individuals earning between Rs2.2 million and Rs3.2 million annually, the income tax rate has been reduced from 23% to 20%.

For those earning between Rs3.2 million and Rs4.1 million, the rate has been cut from 30% to 25%.

For annual incomes between Rs4.1 million and Rs5.6 million, the tax rate has been reduced from 35% to 29%.

For those earning between Rs5.6 million and Rs7 million, the rate has been lowered from 35% to 32%.

Officials say the revised structure is aimed at providing meaningful relief to professionals and salaried taxpayers who have faced rising cost-of-living pressures in recent years.

Super Tax Adjustments for High Earners

The government has also proposed changes to the super tax regime.

For individuals and entities earning between Rs150 million and Rs500 million annually, the super tax has been proposed to be abolished entirely.

For those earning above Rs500 million, the super tax rate is proposed to be reduced from 10% to 8%.

Property and Business Sector Reforms

In a move aimed at stimulating investment activity, the government has also proposed reducing the tax on property transfers from 2.5% to 1.25%. Officials say this step is expected to boost activity in the real estate sector and improve liquidity in the market.

Additionally, a fixed tax system for small traders and shopkeepers has been proposed to simplify tax compliance and improve documentation within the retail economy.

Relief-Focused Fiscal Direction

The government says the overall objective of these measures is to reduce the tax burden on the salaried class and provide relief amid current economic challenges.

While the revised tax structure offers immediate benefits to middle-income earners, its long-term impact will depend on revenue collection efficiency and broader economic growth in the coming fiscal year.