KARACHI: The Pakistan government unveiled a federal budget for the 2026-27 fiscal year Tuesday, proposing income tax cuts for salaried workers across four income brackets and the elimination of a surcharge on salaried individuals.
The budget, which also includes broad tax relief for businesses, exporters, retailers and the IT sector, reduces tax rates for salaried employees earning between 2.2 million and 7 million Pakistani rupees annually.
Under the proposal, workers earning between 2.2 million and 3.2 million rupees would see their rate drop from 23% to 20%. The rate would fall from 30% to 25% for the 3.2 million to 4.1 million bracket, from 35% to 29% for those earning between 4.1 million and 5.6 million rupees, and from 35% to 32% for the 5.6 million to 7 million bracket. The government also proposed abolishing the surcharge on salaried individuals.
The budget revises the super tax regime for companies. Firms with profits between 150 million and 500 million rupees would see the super tax eliminated entirely, while companies earning above 500 million rupees would see the rate reduced from 10% to 8%. The existing surcharge structure for banks, oil and gas exploration companies and fertilizer firms remains unchanged.
The construction sector received targeted support. Sales tax on wholesale building materials would be cut from 2.5% to 1.25%, while retail-level taxation would fall from 5.5% to 2.75%.
The IT sector would retain its concessional income tax rate of 0.25% on export earnings. The Final Tax Regime concession for the sector has been extended until June 30, 2029, and the Export Development Surcharge of 0.25% would be abolished. The markup under the Export Facilitation Scheme would drop to 4.5%, and the refund period under the scheme would be extended from nine months to 18 months.
Small retailers with annual sales of 1 billion rupees or less would be brought under a new fixed tax regime through Section 99B. Eligible retailers would pay a flat 1% tax on annual sales and could adjust input withholding taxes. The point-of-sale system requirement would be replaced with a QR code-based verification mechanism.
