ISLAMABAD: The federal government on Friday proposed major income tax relief for salaried individuals in the Federal Budget 2026–27, with Finance Minister Senator Muhammad Aurangzeb announcing restructured tax slabs, additional intermediate brackets and the complete abolition of the surcharge on the salaried class measures widely described by tax experts as among the most significant in recent years.
Under the Finance Bill, marginal tax rates for salaried taxpayers have been revised downward across four income brackets. Individuals earning between Rs2.2 million and Rs3.2 million annually will now face a reduced rate of 20%, down from 23%, with tax computed as Rs116,000 plus 20% of the amount exceeding Rs2.2 million. For those in the Rs3.2 million to Rs4.1 million bracket, the rate falls from 30% to 25%, with liability set at Rs316,000 plus 25% of the surplus over Rs3.2 million.
At higher income levels, earners between Rs4.1 million and Rs5.6 million will see their rate cut from 35% to 29%, paying Rs541,000 plus 29% of the excess above Rs4.1 million.
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For those earning between Rs5.6 million and Rs7 million, the rate is reduced from 35% to 32%, with tax assessed at Rs976,000 plus 32% of the amount beyond Rs5.6 million. New intermediate slabs have also been introduced to reduce bracket-jumping distortions.
In a move that has drawn particular praise, the government proposed the complete elimination of the surcharge on salaried taxpayers. Aurangzeb noted that abolishing the surcharge had been a persistent demand from the salaried community and that the government had already reduced it from 10% to 9% in last year’s budget. “We are now going all the way, he said.
Tax lawyer Waheed Shahzad Butt welcomed the announcements, calling them a meaningful and overdue recognition of the salaried class’s contribution to the national exchequer. The government has allowed great relief, Butt said. “Reducing rates across multiple brackets, introducing intermediate slabs, and abolishing the surcharge together constitute a coherent and fair package. Salaried individuals, who cannot hide income and bear the full brunt of withholding tax, have long deserved this.
Copyright Business Recorder, 2026
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