Pakistan: Budget 2026-27 – 1 July 2026

The Federal Budget 2026-27 was presented to the National Assembly on 12th June 2026 by the Finance Minister. This year’s budget’s core focus has been expanding the tax base, boosting development spending in key infrastructure sectors, and meeting stringent IMF reform targets to sustain economic recovery.

Following measures, impacting payroll, were proposed in the Finance Bill 2026 and are subject to change during National Assembly debate and approval until the Finance Act 2026 is passed and notified.

1. Revised Income Tax Slabs for Salaried Individuals

The Finance Bill 2026 substitutes the salaried-individual tax rate table in the First Schedule, Part I, Division I, clause (2). The revised annual slabs proposed to be applicable to salary income from 1st July 2026 are set out below:

What changed: the rate on the PKR 2,200,001–3,200,000 band is reduced from 23% to 20%, and on the PKR 3,200,001–4,100,000 band from 30% to 25%. Income above PKR 4,100,000 is restructured into graduated bands (29%, 32% and 35%), so the top 35% rate now applies only above PKR 7,000,000 (previously a flat 35% applied above PKR 4,100,000). The tax-free threshold remains PKR 600,000.

2. Abolition of Surcharge on Salaried Individuals

Surcharge of 9% of the income tax payable by individuals whose income exceeds PKR 10,000,000 in a tax year has been proposed to be abolished.

3. Increase in the Minimum Wage

The minimum monthly wage is proposed to be raised by 10% (an increase of PKR 3,700), from PKR 37,000 to PKR 40,700 per month (budget proposal).

Sources: https://www.finance.gov.pk/

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change

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Pakistan – Budget 2026-27 – 1 July 2026

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