Budget 2026-27: Salaried class set for 'tax cuts' under new proposals

ISLAMABAD: Prime Minister Shehbaz Sharif has directed preparations for significant income tax relief for the salaried class in the upcoming federal budget 2026-27, ARY News reported on Wednesday, citing sources.

Sources told ARY News that proposals under consideration include tax relief for individuals earning monthly salaries of Rs100,000, Rs200,000, and Rs300,000, with an initial framework prepared to reduce income tax rates across these brackets.

They further said that a working proposal has been developed for providing relief on annual incomes up to Rs3.6 million. The plan also includes reducing tax rates for mid-income earners and restructuring tax slabs.

Under the proposed changes, the number of income tax slabs may be increased from six to eight in the next fiscal year. A new slab is also being considered for individuals earning Rs10 million annually or more.

According to sources, a briefing on the proposals has already been presented to the Prime Minister. Any final decision on income tax relief will require approval from the International Monetary Fund (IMF).

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Three different relief scenarios have reportedly been shared with the IMF, including possible reductions of 3, 5, and 10 per cent in tax rates for various income groups.

Under the proposals, annual income earners of Rs1.2 million, Rs2.2 million, and Rs3.2 million could see tax rates reduced to 3, 5, and 10 per cent respectively.

Sources further said that individuals earning Rs4.1 million or more annually may also see adjustments in the highest tax rate, which currently stands at around 35 per cent.

The government estimates that around 550,000 individuals fall within the Rs200,000–300,000 monthly income bracket, while over 150,000 people earn Rs4.1 million or more annually.

Discussions are ongoing, and final figures are subject to approval in consultation with the IMF.