Govt unveils tax relief across four slabs for salaried individuals in FY2026-27 budget

• Four income slabs revised.
• Surcharge removal proposed.
• 7% raise for employees.

The federal government on Friday proposed income tax relief in four slabs for salaried individuals and the abolition of surcharge on the salaried class as Finance Minister Senator Muhammad Aurangzeb presented the budget for fiscal year 2026–27 in the National Assembly.

Finance Minister Aurangzeb said that Prime Minister Shehbaz Sharif’s government is aware of the difficulties faced by government and private salaried individuals and has decided to provide relief on the instructions of the premier.

The Finance Bill proposed reducing income tax rates for salaried taxpayers through restructuring of tax slabs, with additional intermediate slabs introduced.

For salaried persons earning between Rs2.2 million and Rs3.2 million annually, the applicable marginal tax rate is proposed to be reduced from 23% to 20%. Under the Finance Bill, the proposed tax is Rs116,000 plus 20% of the amount exceeding Rs2.2 million.

For those earning between Rs3.2 million and Rs4.1 million annually, the applicable marginal tax rate is proposed to be reduced from 30% to 25%. The proposed tax is Rs316,000 plus 25% of the amount exceeding Rs3.2 million.

For salaried individuals earning between Rs4.1 million and Rs5.6 million, the applicable marginal tax rate is proposed to be reduced from 35% to 29%. The proposed tax is Rs541,000 plus 29% of the amount exceeding Rs4.1 million.

For those earning between Rs5.6 million and Rs7 million, the applicable marginal tax rate is proposed to be reduced from 35% to 32%. The proposed tax is Rs976,000 plus 32% of the amount exceeding Rs5.6 million.

In another relief measure, the government has proposed abolishing the surcharge imposed on the salaried class.

Aurangzeb said the surcharge had been a long-standing demand, adding that the government had already reduced its rate from 10% to 9% in the previous budget.

He said the proposed complete abolition of the surcharge was part of the government’s effort to reduce the burden on the salaried class.

Separately, he announced a 7% increase in salaries of government employees, citing the difficulties caused by inflation.

He also proposed a 7% increase in pensions of retired employees and a 10% increase in the minimum monthly wage.