Government Announces Lower Tax Rates Across Multiple Income Brackets
ISLAMABAD: The federal government has proposed significant income tax relief for salaried individuals in the Federal Budget 2026-27, reducing tax rates across several income brackets as part of efforts to ease the burden on middle-income earners.
Presenting the budget, the government stated that the measures are intended to fulfill its commitment to provide relief to the salaried and middle-income segments of society.
Under the proposed changes, salaried individuals earning between Rs2.2 million and Rs7 million annually will benefit from reduced tax rates. Taxpayers with annual incomes between Rs2.2 million and Rs3.2 million would see their tax rate reduced from 23 percent to 20 percent.
Similarly, those earning between Rs3.2 million and Rs4.1 million would receive a reduction from 30 percent to 25 percent, while individuals earning between Rs4.1 million and Rs5.6 million would see their tax rate lowered from 35 percent to 29 percent.
For annual incomes ranging from Rs5.6 million to Rs7 million, the proposed rate would decrease from 35 percent to 32 percent.
Proposal Includes Complete Removal of Surcharge
In addition to lowering income tax rates, the government has proposed abolishing the surcharge currently imposed on salaried taxpayers.
Officials noted that the surcharge had remained a longstanding concern for employees. Last year, authorities reduced the surcharge rate from 10 percent to 9 percent. The latest proposal seeks to eliminate the surcharge entirely, providing further relief to taxpayers.
The government described the measure as part of broader efforts to support household incomes and improve disposable earnings.
Businesses Also Expected to Benefit from Tax Adjustments
The budget also proposes reductions in super tax rates for businesses. According to the budget document, companies earning between Rs150 million and Rs500 million annually would receive a one-percentage-point reduction in super tax across applicable slabs.
Officials indicated that additional relief for businesses earning above Rs500 million has also been proposed, although complete details were not immediately available.
The proposed tax measures reflect the government’s attempt to balance revenue collection goals with economic growth, investment promotion and financial relief for both individuals and businesses.
