The federal government is considering tax relief worth nearly Rs. 50 billion for the salaried class in Budget 2026-27, with proposals aimed at lowering income tax rates for middle and higher income earners.
Sources said Prime Minister Shehbaz Sharif has directed officials to prepare relief measures for salaried employees, including those earning monthly incomes of Rs. 100,000, Rs. 200,000, and Rs. 300,000. A preliminary framework has been developed to reduce tax rates and revise the existing income tax structure.
As part of the proposed changes, the number of income tax slabs may be increased from six to eight. The government is also considering creating a separate tax slab for individuals earning Rs. 10 million or more annually.
One of the key proposals under review would reduce the tax rate for individuals earning up to Rs. 267,000 per month by 5 percent. If approved, the applicable tax rate for this income bracket would fall from 25 percent to 20 percent. Around 400,000 employees are expected to benefit from the measure.
Sources said a broader relief plan has also been prepared for taxpayers with annual incomes of up to Rs. 3.6 million. Three separate scenarios, involving tax reductions of 3 percent, 5 percent, and 10 percent for different income groups, have reportedly been shared with the International Monetary Fund for discussion.
Under the proposals, individuals earning Rs. 1.2 million, Rs. 2.2 million, and Rs. 3.2 million annually could face lower tax rates of 3 percent, 5 percent, and 10 percent, respectively. The government is also considering a tax rate of 29 percent for monthly incomes of up to Rs. 467,000 and 32 percent for incomes of up to Rs. 583,000.
The maximum tax rate of 35 percent is expected to remain in place for individuals earning more than Rs. 583,000 per month or over Rs. 7 million annually. However, officials are reviewing the possibility of abolishing the surcharge currently imposed on individuals earning more than Rs. 10 million per year.
According to sources, approximately 550,000 taxpayers fall within the Rs. 200,000 to Rs. 300,000 monthly income bracket, while more than 150,000 individuals earn Rs. 4.1 million or more annually. Any final tax relief package will require approval from the International Monetary Fund before it can be incorporated into the federal budget.
The proposals remain under discussion and may be adjusted before the government presents the final budget measures for the next fiscal year.
