Federal Budget 2026-27 Unveils Relief Package for Salaried Class
ISLAMABAD: The federal budget for the fiscal year 2026-27 has introduced a comprehensive relief package for salaried individuals, featuring reduced income tax rates, the elimination of the 9% surcharge, and a 7% increase in salaries and pensions for government employees. Presenting the budget in the National Assembly, Finance Minister Muhammad Aurangzeb acknowledged the financial hardships faced by both public and private sector employees and announced a restructuring of tax slabs to provide relief.
Revised Income Tax Slabs
Under the proposed measures, the tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually will be reduced from 23% to 20%. For those with annual incomes between Rs3.2 million and Rs4.1 million, the rate will drop from 30% to 25%. Taxpayers earning between Rs4.1 million and Rs5.6 million will see their rate decrease from 35% to 29%, while those with incomes from Rs5.6 million to Rs7 million will benefit from a reduction from 35% to 32%.
Abolition of Surcharge
The finance minister also announced the complete abolition of the surcharge imposed on salaried taxpayers, describing it as a long-standing demand. The surcharge had already been reduced from 10% to 9% in the previous budget and is now proposed to be eliminated entirely.
Pay and Pension Increase
As part of broader relief measures, the government proposed a 7% ad hoc increase in salaries for federal government employees and a 7% rise in pensions for retired federal employees. Additionally, a 10% increase in the minimum monthly wage was announced to support workers and improve purchasing power.
Budget Strategy
Overall, the relief forms a central part of the government's budget strategy for the coming fiscal year, combining tax reductions, income support measures, and sector-specific incentives aimed at promoting investment, economic activity, and documentation of the economy, according to budget documents. (WITH INPUT FROM APP)
