ISLAMABAD: The federal government is considering targeted tax relief for high-income salaried individuals by raising the highest income tax slab threshold and abolishing the existing surcharge on top earners in the Federal Budget 2026-27.
According to sources familiar with budget discussions, the government has proposed increasing the upper income tax slab threshold for salaried taxpayers from Rs. 4.1 million to Rs. 7 million annually. The move is aimed at reducing the tax burden on upper-middle-income professionals whose salaries have increased over recent years largely due to inflation, pushing many into higher tax brackets without a significant improvement in their real purchasing power.
In addition, the government is planning to withdraw the 10 percent surcharge currently imposed on individuals in the highest income tax bracket. If approved, the measure would lower the effective tax rate for top-earning salaried taxpayers and provide meaningful relief to a segment that has faced rising taxation in recent years.
However, sources indicated that no major changes are expected for taxpayers earning between Rs. 600,000 and Rs. 1.2 million annually. As a result, lower- and lower-middle-income salaried individuals may not receive any direct tax relief in the upcoming budget.
The salaried class remains one of the largest contributors to Pakistan’s direct tax revenues and is widely regarded as one of the most heavily taxed segments of the formal economy. Tax experts have repeatedly highlighted the imbalance in the tax structure, pointing out that sectors such as agriculture, retail, and real estate continue to contribute relatively less despite their significant share in economic activity.
Over the years, successive governments have largely relied on documented salaried individuals to boost revenue collection by increasing tax rates and adjusting income thresholds, rather than substantially expanding the tax net to include untaxed sectors.
The latest proposal signals a limited shift in policy, although the planned relief appears to be concentrated primarily on higher-income salaried taxpayers ahead of the announcement of the Federal Budget 2026-27.
