ISLAMABAD (Mudassar Ali Rana) – The government is preparing a major tax relief package for the salaried class in the upcoming federal budget, with proposals to revise income tax slabs and reduce tax rates for multiple income groups.
Work on the relief package has been completed, and it includes proposals to reduce income tax rates for individuals earning between Rs100,000 and Rs300,000 per month.
According to sources, preparations are also underway to abolish the 10 percent surcharge on annual salaries of Rs10 million or more. The number of income tax slabs is also likely to be increased from six to eight.
Officials have briefed Prime Minister Shehbaz Sharif on the proposals, while final approval from the International Monetary Fund (IMF) is still awaited.
Sources said three relief scenarios – 3 percent, 5 percent and 10 percent reductions — have been shared with the IMF. A final decision between the Federal Board of Revenue (FBR) and the IMF is expected within the next day regarding the proposed relief package.
IMF approval awaited on tax relief for salaried class in Budget 2026-27
According to informed sources, tax relief proposals have been shared for salary brackets of Rs1.2 million, Rs2.2 million and Rs3.2 million annually, suggesting possible reductions in income tax rates under different slabs.
The highest slab, currently covering individuals earning up to Rs4.1 million annually, may be extended to Rs7 million, along with the introduction of a new slab for those earning Rs10 million or more annually.
The existing 35 percent tax rate for high-income earners may also be revised downward, according to the proposals under review.
Sources added that around 550,000 individuals earning between Rs200,000 and Rs300,000 per month are expected to benefit from the proposed relief measures.
In addition, the government has decided to abolish the 1 percent advance income tax on exporters in the 2026–27 budget, which could provide relief of up to Rs60 billion to the export sector.