Islamabad, June 12, 2026: The federal government on Friday proposed significant income tax relief for salaried individuals through revised tax slabs and the complete abolition of surcharge on the salaried class, as Finance Minister Senator Muhammad Aurangzeb presented the Budget 2026-27 in the National Assembly.
Presenting the Finance Bill, the finance minister said the government was fully aware of the financial challenges faced by salaried employees in both the public and private sectors and had decided to provide relief on the directives of Prime Minister Shehbaz Sharif.
Under the proposed measures, income tax rates for salaried taxpayers have been reduced across several income brackets through a restructuring of tax slabs and the introduction of additional intermediate categories.
For salaried individuals earning between Rs2.2 million and Rs3.2 million annually, the marginal tax rate has been proposed to be reduced from 23 percent to 20 percent. The proposed tax liability will be Rs116,000 plus 20 percent of the amount exceeding Rs2.2 million.
For taxpayers with annual incomes ranging from Rs3.2 million to Rs4.1 million, the marginal tax rate is proposed to be lowered from 30 percent to 25 percent. The applicable tax would be Rs316,000 plus 25 percent of the amount exceeding Rs3.2 million.
Similarly, salaried individuals earning between Rs4.1 million and Rs5.6 million annually would see their marginal tax rate reduced from 35 percent to 29 percent. Under the proposal, tax payable would be Rs541,000 plus 29 percent of the amount exceeding Rs4.1 million.
For those earning between Rs5.6 million and Rs7 million annually, the marginal tax rate is proposed to be cut from 35 percent to 32 percent. The tax amount would be Rs976,000 plus 32 percent of the income exceeding Rs5.6 million.
In another major relief measure, the government has proposed the complete abolition of the surcharge currently imposed on salaried individuals. Aurangzeb noted that the removal of the surcharge had been a long-standing demand of the salaried class, adding that its rate had already been reduced from 10 percent to 9 percent in the previous budget.
He said the proposed elimination of the surcharge reflects the government’s commitment to easing the tax burden on wage earners.
The finance minister also announced a 7 percent increase in salaries of government employees, citing inflationary pressures and rising living costs. In addition, a 7 percent increase in pensions for retired employees and a 10 percent increase in the minimum monthly wage were proposed as part of the government’s broader relief package.
The proposed measures are aimed at providing financial support to salaried and retired individuals while helping low-income workers cope with the impact of inflation.
