ISLAMABAD: Finance Bill 2026 has abolished super tax on persons having income of up to Rs. 500 million. The rate has been reduced from 10 percent to 8 percent for persons having income of more than Rs. 500 million. However, these concessions do not apply to banking, exploration and production sector and fertilizer sectors.
Under the Finance Bill 2026, the section 7E, relating to taxation of deemed income from capital assets situated in Pakistan, has been omitted.
A major relief is proposed to be extended to high earning persons on which super tax was imposed through Finance Act, 2022 through retrospective effect and went through changes extending the scope and the wording.
READ MORE: FBR approached to refund 7E, Super Tax collections
Now through Finance Bill 2026 it is proposed that Super Tax should be abolished for persons whose income does not exceed Rs.500 million. It is proposed that in future super tax would be leviable on high earning persons where income exceed Rs.500 million and the rate of tax is also proposed to be reduced to 8% instead of earlier rate of 10%.
However, it is unclear that whether the relief given would be applicable from Tax Year 2026 for which the returns of total income are due in September – December 2026. It is noteworthy that at the time of levy through Finance Act, 2022 the super tax was levied with retrospective effect from Tax Year 2022 and not only the levy with retrospective effect but the constitutionality was recently endorsed by the Federal Constitution Court.
In view of the aforesaid verdict of the apex court in favor of the Government the proposed relief is to lessen the burden of taxation on the high earning persons. Previously, super tax applicable where the income exceeded Rs.150 Million and the rate of tax starting from 1% was raised to 10% on where income exceeded Rs.500 Million, tax experts added.
Under the new budgetary provisions, Super Tax has been completely abolished for certain categories of taxpayer, whether individuals, associations of persons, or companies, whose annual income does not exceed Rs.500 million. This move is expected to ease the tax burden on a large segment of the business community and incentivise compliance. For persons with annual income exceeding Rs. 500 million, the applicable Super Tax rate has been reduced from 10% to 8%, offering a meaningful reduction in the effective tax liability of larger corporate and business entities.
It is pertinent to note that the aforesaid concessions and relief measures are not applicable to the banking sector, the Exploration and Production (ENP) sector and the fertilizer sector. These industries shall continue to be governed by the existing Super Tax regime without the benefit of the aforementioned reductions. Tax lawyer Waheed Shahzad Butt has called upon the Federal Board of Revenue to refund Super Tax that was unlawfully collected on Capital Gain income category taxpayers as per Federal Constitutional Court specific order to exclude capital gain income from super tax.
He stated that the levy of Super Tax on capital gains was legally untenable and without lawful authority and that affected taxpayers are entitled to seek refund of such amounts.
He urged the FBR to proactively process and return the illegally collected amounts to the rightful taxpayers without further delay.
The rationalization of Super Tax in Budget 2026-27 is seen as a positive step towards reducing the overall tax burden on the productive economy. However, legal and taxation experts continue to emphasize that genuine tax reform must also address historic grievances, including the unlawful collection of levies on income categories not lawfully subject to such charges.
Copyright Business Recorder, 2026