Salaried Class Paid More Than Double the Tax of Property Sector

Pakistan’s salaried class paid Rs. 630 billion in income tax during fiscal year 2025-26, around 127% more than the Rs. 278 billion paid by the real estate sector, even as the federal budget granted significantly larger tax relief to property transactions than to salaried individuals.

According to provisional estimates, salaried employees contributed Rs. 630 billion in income tax during FY26, up 4% or Rs. 24 billion from the previous fiscal year. The final figure may change slightly after reconciliation of the June book adjustments by the Accountant General of Pakistan Revenues (AGPR).

By comparison, the real estate sector paid Rs. 278 billion in withholding taxes collected under Sections 236C and 236K of the Income Tax Ordinance on the sale and purchase of immovable property. Although collections from the sector increased 17% year-on-year, the government has substantially reduced these tax rates in the 2026-27 budget.

According to Finance Secretary Imdadullah Bosal, the budget provides Rs. 52 billion in income tax relief to salaried taxpayers. Tax rates for several income slabs have been reduced, including lowering the rate from 23% to 20% for monthly incomes of up to Rs. 267,000 and reducing the next slab to 25% for monthly incomes of up to Rs. 341,000.

The government has also increased the annual income threshold for the highest 35% tax rate from Rs. 4.1 million to Rs. 7 million, reducing the annual tax liability for individuals in the top slab by up to Rs. 257,000.

However, the property sector received an estimated Rs. 115 billion in tax relief, more than double the relief extended to salaried taxpayers. Under the new budget, the withholding tax on property sales has been reduced by merging three slabs into a single 2.75% rate, compared with a previous maximum rate of 5.5%.

Similarly, the withholding tax on property purchases has been cut from 2.5% to 1.25%, marking the second consecutive year that taxes on property buyers have been reduced. During FY26, withholding tax collections from property purchases had already declined 27% to Rs. 87 billion, while collections from property sales increased 62% to Rs. 191 billion, according to provisional figures.

The budget also introduces an optional fixed tax regime for retailers, allowing eligible traders to pay 1% of annual sales as income tax in exchange for exemption from mandatory digital invoicing requirements and tax audits. Businesses opting into the scheme will also be allowed to exit after one year.

The latest budget measures mark a shift in the government’s tax policy after two years of tighter taxation on the property market, with the new concessions aimed at reviving activity in the real estate sector while easing the tax burden on salaried taxpayers to a lesser extent.