Budget 2026: Good news for Pakistanis earning up to Rs 300,000 per month amid tax relief
ISLAMABAD – Pakistan’s salaried class may finally be in for some meaningful relief as the government is considering moving away from aggressive taxation in Budget 2026-27, which aims to cut income tax rates for employees earning up to Rs 300,000 a month.
If approved, the measures could put more money back into the pockets of millions of middle-income workers who have long complained of being disproportionately taxed.
The Pakistani government is mulling a tax relief package of around Rs 50 billion aimed at reducing the burden on salaried employees, especially in the middle and upper-middle income groups. The move comes as rising inflation and high taxes continue to squeeze household budgets across the country.
Prime Minister Shehbaz Sharif directed the economic policy makers to finalize the proposals that would provide relief to employees earning up to Rs 3 lakh per month. Officials have reportedly prepared an initial framework that includes lower tax rates and restructuring of the existing income tax system.
Among the proposals under consideration, the most significant proposal would reduce the tax rate from 25 percent to 20 percent for individuals earning up to Rs 267,000 per month. The government is also looking for wider tax relief for individuals earning up to Rs. 3.6 million annually.
According to sources, three separate models with tax cuts 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 the proposed framework, taxpayers earn Rs. 1.2 million, Rs.2.2 million, and Rs.3.2 million per annum may qualify for lower tax rates. The authorities are also reviewing the revised tax bracket, which includes a 29 percent rate for monthly income up to Rs. 467,000 and 32 percent for income up to Rs. 583,000
The number of income tax slabs may be increased 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 higher income earners while extending relief to lower brackets.
While the highest tax rate of 35 percent is expected to remain for those earning more than Rs. 583,000 per month or above Rs. 7 million annually, the authorities are currently exploring the possibility of removing the additional surcharge on those with annual incomes above Rs. 10 million
The potential impact can be substantial. According to government estimates, about 550,000 taxpayers fall within Rs. 200,000 to Rs.300,000 monthly income range, while more than 150,000 people earn more than Rs. 4.1 million annually.
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