ISLAMABAD: The federal government of Pakistan has officially announced a restructured income tax system for salaried individuals and public sector employees, introducing revised tax slabs scheduled to take effect from July 1, 2026.
This legislative change follows the National Assembly’s formal approval of the Finance Bill 2026, which establishes updated fixed tax amounts alongside variable percentage thresholds mapped across multiple income brackets to fundamentally reshape the tax liabilities of the country’s salaried workforce.
Under the newly approved framework, the threshold for basic tax exemption remains untouched, meaning individuals drawing an annual income of up to PKR 600,000 will continue to be completely exempt from paying income tax.
For those falling into the next tier—earning between PKR 600,000 and PKR 1,200,000 annually—the government has set a nominal income tax rate of 1 percent.
As income climbs into the middle and upper-middle brackets, the tax burden steps up progressively using a combination of fixed and variable rates. Individuals earning between PKR 1.2 million and PKR 2.2 million will be charged a flat fixed tax of PKR 6,000, plus an additional 11 percent tax on the amount exceeding the PKR 1.2 million threshold.
Those in the PKR 2.2 million to PKR 3.2 million range will face a fixed tax of PKR 116,000 along with a 20 percent tax on any income exceeding PKR 2.2 million, which notably reflects a reduction from the previous variable rate of 23 percent.
For higher earners, the liabilities continue to scale up significantly. Individuals pulling in between PKR 3.2 million and PKR 4.1 million are subject to a fixed tax of PKR 346,000 plus 25 percent on the amount exceeding PKR 3.2 million, while the slab from PKR 4.1 million to PKR 5.6 million incurs a fixed tax liability of PKR 541,000 alongside a 29 percent tax on additional income above the PKR 4.1 million mark.
The heaviest tax revisions are targeted squarely toward the highest earning tiers. Individuals making between PKR 5.6 million and PKR 7.0 million annually must pay a fixed tax of PKR 976,000 complemented by a 32 percent tax on the amount surpassing PKR 5.6 million.
Finally, for elite earners pulling in more than PKR 7 million annually, the fixed tax has been set at a substantial PKR 1,424,000, with a maximum 35 percent income tax applied to all additional earnings exceeding that threshold. According to the Finance Bill 2026, these new rates will be uniformly applied to both the salaried class and government employees starting July 1, 2026.
