Pakistan Introduces New Income Tax Slabs for Salaried Employees from July 1, 2026

ISLAMABAD: The federal government has introduced new income tax slabs for salaried individuals, including government employees, with effect from July 1, 2026, following the approval of the Finance Bill 2026 by the National Assembly.

Under the new tax structure, individuals earning up to Rs600,000 annually will remain fully exempt from income tax.

Those with an annual income between Rs600,000 and Rs1.2 million will be subject to a 1% income tax.

For annual incomes ranging from Rs1.2 million to Rs2.2 million, taxpayers will pay a fixed tax of Rs6,000, in addition to 11% tax on the amount exceeding Rs1.2 million.

Individuals earning between Rs2.2 million and Rs3.2 million annually will pay a fixed tax of Rs16,000, along with 20% tax on the amount exceeding Rs2.2 million. The government noted that this rate has been reduced from the previous 23%.

According to the Finance Bill, taxpayers with annual incomes between Rs3.2 million and Rs4.1 million will pay a fixed tax as specified under the new schedule, plus 25% tax on the income exceeding the lower threshold.

Those earning between Rs4.1 million and Rs5.6 million annually will be required to pay the prescribed fixed tax and 29% tax on the amount exceeding Rs4.1 million.

For annual incomes ranging from Rs5.6 million to Rs7 million, the applicable rate will be the prescribed fixed tax plus 32% tax on the amount exceeding Rs5.6 million.

Individuals earning more than Rs7 million annually will pay the prescribed fixed tax along with 35% tax on income exceeding Rs7 million.

The government said the revised income tax rates will apply uniformly to salaried employees in both the public and private sectors from July 1, 2026.