Pakistan Budget 2026-27: Major Tax Relief Proposed for Salaried Class, Surcharge to Be Abolished

Islamabad: The federal government has proposed significant tax relief for Pakistan’s salaried class in the Federal Budget 2026-27, including lower income tax rates and the abolition of the surcharge on salaried individuals.

Presenting the budget in Parliament, Finance Minister Muhammad Aurangzeb announced a series of measures aimed at reducing the tax burden on salaried employees. According to the budget documents, Prime Minister Shehbaz Sharif is aware of the financial challenges faced by both public and private sector employees and directed the government to provide relief through revised tax slabs.

Under the proposed changes, salaried taxpayers have been divided into four income slabs. The tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually is proposed to be reduced from 23 percent to 20 percent. For those earning between Rs3.2 million and Rs4.1 million, the tax rate is proposed to be cut from 30 percent to 25 percent.

Similarly, taxpayers with annual incomes ranging from Rs4.1 million to Rs5.6 million would see their tax rate reduced from 35 percent to 29 percent. For individuals earning between Rs5.6 million and Rs7 million per year, the tax rate is proposed to be lowered from 35 percent to 32 percent.

The budget documents also reveal that the government has decided to abolish the surcharge imposed on the salaried class, a long-standing demand of taxpayers. The surcharge had already been reduced from 10 percent to 9 percent in the previous budget, and the government is now proposing its complete removal.

It is worth noting that the federal government has also proposed a 7 percent increase in salaries and pensions in the new fiscal year’s budget.