The federal government is considering a significant tax relief package worth around Rs. 50 billion for salaried individuals in the upcoming Budget 2026-27, aimed at reducing the income tax burden on middle and upper-middle income earners.
According to official sources, Prime Minister Shehbaz Sharif has instructed authorities to work on proposals that provide relief to employees earning monthly incomes of Rs. 100,000, Rs. 200,000, and Rs. 300,000. A preliminary framework has already been prepared to revise income tax rates and restructure existing slabs.
Under the proposed changes, the number of income tax slabs may be increased from six to eight, while a separate higher-income category could also be introduced for individuals earning Rs. 10 million or more annually.
One of the key proposals under review includes a possible 5 percent reduction in tax rates for those earning up to Rs. 267,000 per month, which could lower the rate from 25 percent to 20 percent and benefit an estimated 400,000 salaried taxpayers.
Officials are also evaluating a broader relief structure for individuals earning up to Rs. 3.6 million annually, with multiple scenarios suggesting tax cuts ranging from 3 percent to 10 percent across different income groups. These proposals have reportedly been shared with the International Monetary Fund for consultation.
Additional options under consideration include revised tax rates of 29 percent for monthly incomes up to Rs. 467,000 and 32 percent for those earning up to Rs. 583,000.
The top marginal tax rate of 35 percent is expected to remain unchanged for high-income earners, although the government is reviewing the possible removal of the surcharge on individuals earning more than Rs. 10 million annually.
Sources indicate that around 550,000 taxpayers fall within the Rs. 200,000–300,000 monthly income range, while over 150,000 individuals earn more than Rs. 4.1 million annually. Any final package will require approval from the IMF before being included in the federal budget.
The proposals are still under discussion and may be revised ahead of the final budget announcement.
