Pakistan budget 2026–27: Key highlights, expected measures

Pakistan’s total federal budget outlay for the fiscal year 2026-27 is expected to be approximately Rs18 trillion, ARY News reported on Thursday, citing well-informed sources. The federal budget is scheduled to be presented on June 12.

A 10% increase in salaries is expected, while the salaried class may receive relief in income tax. Tax rates for individuals earning between Rs1.2 million and Rs2.2 million annually may be reduced.

The government is considering a reduction in Super Tax; however, Corporate Income Tax is expected to remain unchanged. Prices of certain consumer products, including cosmetics, face powder, mascara, shampoo, and soap, may decline due to proposed tax adjustments.

Electric vehicles (EVs), hybrid vehicles, and plug-in hybrid vehicles are expected to become more expensive under the proposed budget measures.

Revenue projections include:

Direct Taxes: Rs7.413 trillion
Sales Tax: Rs4.727 trillion
Customs Duty: Rs1.651 trillion
Federal Excise Duty: Rs1.043 trillion

The Petroleum Development Levy (PDL) collection target may be set at Rs1.727 trillion, which is Rs259 billion higher than the current fiscal year’s target of Rs1.468 trillion.

A Gas Surcharge collection target of Rs151 billion is also under consideration.

Debt servicing and interest payments

Domestic Debt Servicing: Rs6.652 trillion
External Debt Servicing: Rs1.107 trillion

The budget may introduce new taxes amounting to Rs220 billion.

Proposed income tax slabs for salaried individuals

Tax relief for employees earning monthly salaries of Rs100,000, Rs200,000, and Rs300,000.
Revised tax relief proposals for annual salaries up to approximately Rs3.6 million.
Possible abolition of the 10% surcharge currently applicable to annual salaries of Rs10 million or more.
Expansion of income tax slabs for salaried individuals from six to eight categories.

For government expenditures

Non-development expenditure for federal ministries and departments may be set at Rs1.07 trillion.
More than Rs1.1 trillion is expected to be allocated for pensions.
Rs838 billion has been proposed for the Benazir Income Support Programme (BISP).
The quarterly BISP stipend may be increased from Rs13,000 to Rs14,500.

Automobile sector measures

The budget proposes the introduction of an Environmental Levy on luxury vehicles:

10% levy on petrol and diesel vehicles with engine capacities between 2001cc and 3000cc.
19.5% levy on petrol and diesel vehicles exceeding 3000cc.
The government expects to generate approximately Rs25.8 billion through Environmental Levy collections on vehicles above 2000cc.

To support the local automobile industry:

Tax on imported raw materials may be reduced to 1%.
Import duty on parts used for local manufacturing may be reduced from 10% to 5%.
Tax on imported auto parts for the local industry may be reduced from 20% to 10%.
Manufacturers will be required to pass 62 key safety and quality standard tests.
Concessional tax benefits may be withdrawn if manufacturers fail to localize parts production.

For imported SUVs and jeeps:

The current tax rate may be reduced by 2 percentage points from 50%.
Over the next five years, the tax rate is expected to be gradually reduced from 50% to 40%.
Locally manufactured hybrid vehicles may face an increase in sales tax from 8.5% to 18%.

Climate and petroleum measures

The Climate Levy on petroleum products is expected to double from Rs2.5 per litre to Rs5 per litre in the upcoming fiscal year.

Pakistan budget 2026–27: Key highlights and expected measures

Automobile sector measures

Climate and petroleum measures