ISLAMABAD – Pakistan’s salaried class may finally be in line for meaningful relief as the government is considering shift from aggressive taxation approach in Budget 2026-27, with proposals aimed at cutting income tax rates for employees earning up to Rs300,000 per month.
If approved, the measures could put more money back into the pockets of hundreds of thousands of middle-income workers who have long complained of being disproportionately taxed.
Pakistani government is considering tax relief package worth nearly Rs50 billion aimed at reducing the burden on salaried employees, particularly those in the middle- and upper-middle-income groups. The move comes as growing inflation and higher taxation continue to squeeze household budgets across the country.
PM Shehbaz Sharif directed economic policymakers to finalise proposals that would provide relief to employees earning around upto Rs3Lac per month. Officials reportedly prepared preliminary framework that includes lower tax rates and a restructuring of the existing income tax system.
One of most significant proposals under review would slash the tax rate for individuals earning up to Rs267,000 per month from 25 percent to 20 percent. The government is also exploring broader tax relief for individuals earning up to Rs. 3.6 million annually.
According to sources, three separate models featuring tax reductions of 3 percent, 5 percent, and 10 percent for different income groups have been shared with the International Monetary Fund (IMF) as part of ongoing discussions.
Under proposed framework, taxpayers earning Rs. 1.2 million, Rs. 2.2 million, and Rs. 3.2 million annually could qualify for lower tax rates. Authorities are also evaluating revised tax brackets, including a 29 percent rate for monthly incomes up to Rs. 467,000 and 32 percent for incomes up to Rs. 583,000.
The number of income tax slabs may increase from six to eight. A separate tax category is also being considered for individuals earning Rs. 10 million or more annually, allowing the government to better target high-income earners while extending relief to lower brackets.
While highest tax rate of 35 percent is expected to remain intact for those earning above Rs. 583,000 per month or more than Rs. 7 million annually, officials are reviewing the possibility of abolishing the additional surcharge currently imposed on individuals with annual incomes exceeding Rs. 10 million.
The potential impact could be substantial. Government estimates suggest around 550,000 taxpayers fall within the Rs. 200,000 to Rs. 300,000 monthly income range, while more than 150,000 individuals earn over Rs. 4.1 million annually.
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Junaid Khan
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