Islamabad: The federal government is considering a major tax relief package worth nearly Rs. 50 billion for Pakistan’s salaried class in the upcoming Budget 2026-27, aiming to reduce the tax burden on middle- and high-income earners.
According to sources, Prime Minister Shehbaz Sharif has directed relevant authorities to formulate relief measures for salaried employees, particularly those earning monthly incomes of Rs. 100,000, Rs. 200,000, and Rs. 300,000. Officials have reportedly prepared an initial framework that includes lower income tax rates and revisions to the existing tax structure.
Government Proposes New Income Tax Slabs
As part of the proposed reforms, the government may increase the number of income tax slabs from six to eight. A separate tax bracket is also under consideration for individuals earning Rs. 10 million or more annually.
One of the key proposals would reduce the tax rate for individuals earning up to Rs. 267,000 per month by 5 percentage points. If approved, the tax rate for this category would decrease from 25 percent to 20 percent, benefiting an estimated 400,000 salaried employees across the country.
Tax Relief Planned for Middle-Income Earners
Sources revealed that the government has developed a broader tax relief plan for individuals with annual incomes of up to Rs. 3.6 million. Three different scenarios involving tax reductions of 3 percent, 5 percent, and 10 percent for various income groups have reportedly been shared with the International Monetary Fund (IMF) for consultation.
Under the proposed structure:
- Individuals earning Rs. 1.2 million annually could receive a 3 percent tax reduction.
- Taxpayers earning Rs. 2.2 million annually may benefit from a 5 percent cut.
- Those with annual incomes of Rs. 3.2 million could see taxes reduced by 10 percent.
The government is also evaluating a 29 percent tax rate for individuals earning up to Rs. 467,000 per month and a 32 percent rate for those earning up to Rs. 583,000 monthly.
Surcharge Removal Under Review
The maximum income tax rate of 35 percent is expected to remain unchanged for individuals earning more than Rs. 583,000 per month or over Rs. 7 million annually. However, authorities are reviewing a proposal to eliminate the surcharge currently imposed on taxpayers with annual incomes exceeding Rs. 10 million.
Over 550,000 Taxpayers Could Benefit
Official estimates suggest that around 550,000 taxpayers fall within the Rs. 200,000 to Rs. 300,000 monthly income bracket, while more than 150,000 individuals earn Rs. 4.1 million or more annually.
Any final tax relief measures will require approval from the IMF before being incorporated into the federal budget. The proposals remain under discussion and may be revised before the government unveils the final Budget 2026-27.
If approved, the proposed tax reforms in Budget 2026-27 could provide significant financial relief to Pakistan’s salaried class, reduce income tax rates for hundreds of thousands of employees, and reshape the country’s income tax structure for the upcoming fiscal year.
