Pakistan Budget 2026-27: Complete Breakdown & Key Changes

Budget 2026-27 at a Glance

Finance Minister Muhammad Aurangzeb unveiled Pakistan’s federal budget for FY 2026-27 on June 12, 2026. At Rs. 18.77 trillion, it is the largest budget in the country’s history — 6.8% larger than last year’s outlay.

Metric	FY 2025-26	FY 2026-27
Total Outlay	Rs. 17.57 trillion	Rs. 18.77 trillion (+6.8%)
FBR Revenue Target	Rs. 14.13 trillion	Rs. 15.26 trillion (+8%)
GDP Growth Target	3.2% (achieved)	4.0%
Inflation Target	—	8.2%
Minimum Wage	Rs. 37,000/month	Rs. 40,700/month (+10%)
Govt. Salary Increase	—	7%
BISP Allocation	Rs. 716 billion	Rs. 838 billion (+17%)
Defence Budget	Rs. 2,554 billion	Rs. 3,000 billion (+17.6%)
Debt Servicing	Rs. 8,207 billion	Rs. 8,054 billion (−1.86%)
PSDP	Rs. 1,000 billion	Rs. 1,000 billion (flat)

The slight decline in debt servicing in absolute terms reflects the SBP’s rate-cut cycle that began in mid-2024. With the policy rate now significantly below its 2023 peak, interest payments are beginning to ease as a share of revenue — the central reason the government has fiscal space to offer tax relief this year.

Salaried Class: Biggest Relief in Years

The most headline-grabbing element of Budget 2026-27 is the across-the-board cut in income tax rates for salaried employees. Four slabs were reduced by 3 to 6 percentage points, two new slabs were created, and the punishing 9% surcharge on incomes above Rs. 10 million was completely abolished.

New Salaried Tax Slabs (Effective July 1, 2026)

Annual Income (PKR)	Old Rate (FY 2025-26)	New Rate (FY 2026-27)
Up to 600,000	0%	0%
600,001 – 1,200,000	5%	1%
1,200,001 – 2,200,000	15%	11%
2,200,001 – 3,200,000	25%	20%
3,200,001 – 4,100,000	30%	25%
4,100,001 – 5,600,000	35% (single top bracket)	29%
5,600,001 – 7,000,000	35%	32%
Above 7,000,000	35%	35%

What this means in practice:

A salaried employee earning Rs. 150,000/month (Rs. 1.8M/year) previously paid roughly Rs. 90,000 in annual tax. Under the new slabs they pay approximately Rs. 61,200 — a saving of over Rs. 28,000 per year.

An employee earning Rs. 250,000/month (Rs. 3M/year) saves over Rs. 80,000 annually.

Use our Salary Slip Generator to calculate your exact new take-home pay.

Business Income: Unchanged

Business/AOP tax slabs (sole proprietors, partnerships) were not changed in Budget 2026-27. The maximum rate remains 45% on income above Rs. 5.6M.

Property Taxes: Major Relief for Buyers and Sellers

Budget 2026-27 makes significant changes to property withholding taxes, in a move aimed at formalising the real estate sector and encouraging documentation.

Section 236K (buyer advance tax): Reduced to a flat 1.5% — a massive reduction from the previous tiered structure that went up to 20% for non-filers on properties above Rs. 100M
Section 236C (seller advance tax): Reduced to a flat 2.75% — down from progressive rates that reached 10% for non-filers
Section 7E (deemed rental income): Abolished — this was a controversial provision taxing undeveloped plots as if they generated income; its removal is seen as a significant relief for land holders

These changes primarily benefit documented taxpayers. The rationale: lowering formal sector transaction costs encourages buyers and sellers to transact through documented channels rather than cash/under-declared deals.

IT Sector & Freelancers: Certainty Through 2030

The Digital Nation Act’s preferential tax regime — a 0.25% final tax on IT export receipts received in foreign currency through SBP-approved channels — has been extended to June 30, 2030. This gives Pakistan’s 500,000+ registered freelancers and IT exporters three additional years of fiscal certainty.

The budget also maintained the 0.25% tax for IT exporters (not just freelancers), making Pakistan’s software and services export regime one of the most competitive in the region.

If you are an IT professional or freelancer receiving foreign payments, register with PSEB and FBR to access this regime. See our Digital Nation Act Guide for the step-by-step.

Electric Vehicles: Tiered Duty Structure

The budget introduced a differentiated customs duty regime for imported EVs, balancing green mobility goals against luxury import concerns:

EV Value	Customs Duty
Up to Rs. 20 million	0%
Rs. 20M – Rs. 30M	30%
Above Rs. 30M	40%

Additionally, a new Federal Excise Duty (FED) applies to premium imported EVs priced at Rs. 2 crore (Rs. 20M) or above. Local EV assembly concessions and CKD exemptions for electric buses and trucks were extended through June 30, 2027.

Conventional vehicles above 2,000cc also face new FED — affecting premium SUVs like the Toyota Fortuner and Land Cruiser.

Super Tax: Significant Reduction

Finance Act 2026 restructured the super tax that was introduced in 2022:

Exporters: Super tax completely abolished
Income Rs. 150M – Rs. 500M: Super tax abolished (was 2–4%)
Income above Rs. 500M: Reduced to 8% (from 10%)

This effectively removes the super tax burden from mid-tier businesses and rewards export-oriented companies. Large conglomerates and banking companies will still face the 8% rate on their upper-bracket income.

International Card Transactions: 90% Tax Cut

One of the most user-friendly changes: withholding tax on international debit and credit card transactions has been slashed from 5% to 0.5%. This directly benefits:

Professionals paying for software subscriptions (AWS, Adobe, GitHub, etc.)
Frequent travellers
E-commerce importers

Previously, every dollar spent on an international card triggered a 5% WHT that you had to claim as a tax credit later. At 0.5%, the burden becomes negligible.

Where the Money Goes

Expenditure Head	FY 2026-27 Allocation
Debt Servicing	Rs. 8,054 billion (43% of total)
Defence	Rs. 3,000 billion (16%)
BISP (Social Safety Net)	Rs. 838 billion (4.5%)
Pensions	Rs. 1,169 billion (6.2%)
PSDP (Development)	Rs. 1,000 billion (5.3%)
Subsidies	Rs. 1,091 billion (5.8%)

Debt servicing at 43% of total outlay remains the single largest budget item — a structural constraint that limits how much the government can invest in development and social spending. The IMF’s Extended Fund Facility programme continues to anchor fiscal consolidation targets.

Key Infrastructure Commitments

The PSDP (Public Sector Development Programme) remains flat at Rs. 1,000 billion, but the allocation prioritises connectivity:

National Highway Authority: Rs. 225 billion
Quetta–Karachi Road (N-25): Rs. 100 billion
Hyderabad–Sukkur Motorway: Rs. 30 billion
ML-1 Railway Modernisation: Rs. 25 billion
Water projects (dams, bulk supply): Rs. 103.1 billion

Budget Targets & IMF Context

Pakistan’s 37-month IMF Extended Fund Facility (EFF) remains the fiscal anchor. The budget is structured around IMF-agreed targets:

Primary surplus: Maintained
Debt-to-GDP ratio: Targeted at 68.5% (down from 70.7%)
Export target: $32.9 billion
Remittance target: $42.4 billion
Current account deficit: $3.6 billion

The FBR revenue target of Rs. 15.26 trillion is ambitious (+8% YoY) and relies heavily on improved documentation through digital invoicing, Point of Sale (POS) integration, and enforcement against under-declared income in retail and wholesale sectors.

Winners and Losers

Winners:

Salaried class (Rs. 1.2M–7M/year): 3–6 percentage point rate cuts
IT exporters and freelancers: 0.25% tax extended to 2030
Property buyers and sellers: Major reduction in 236K and 236C rates
Exporters: Super tax abolished
International card users: WHT cut from 5% to 0.5%
EV buyers (sub-Rs. 20M): Zero customs duty maintained
Low-income workers: Minimum wage raised to Rs. 40,700

Paying more:

Large conglomerates (income >Rs. 500M): Still face 8% super tax
Premium vehicle buyers (>2,000cc): New FED on large-engine cars
Luxury EV importers (>Rs. 20M): 30–40% duty plus new FED

What You Should Do Now

Recalculate your take-home pay using our Salary Slip Generator — your employer’s payroll software will update from July 1
Check if you are a filer at atl.fbr.gov.pk — property and investment tax rates are significantly lower for filers
If you are a freelancer or IT professional, confirm your PSEB/FBR registration to access the 0.25% rate
Property buyers/sellers: The new lower 236K/236C rates apply from July 1 — factor these into your deal timelines
File your FY 2025-26 return by September 30, 2026 to maintain Active Taxpayer List (ATL) status

All figures are based on the Finance Bill 2026 as presented to the National Assembly on June 12, 2026. Final notified rates effective July 1, 2026 — verify at fbr.gov.pk. This article is for information only and does not constitute tax or financial advice.