Budget may bring Rs50 billion relief by cutting tax rates on salaries above Rs183,400

The federal government may announce Rs50 billion in income tax relief for salaried individuals in the fiscal year 2026-27 budget by reducing rates on monthly earnings above Rs183,400 and revising existing tax slabs, The Express Tribune reported, citing sources.

The proposals include introducing a new tax bracket and raising the income threshold at which the highest rate of 35% becomes applicable.

For individuals earning up to Rs267,000 per month, the tax rate may be reduced by five percentage points to 20%. Around 400,000 taxpayers fall within this income bracket.

The rate for monthly income of up to Rs341,000 may be lowered to 25%, benefiting an estimated 160,000 taxpayers.

The government is also considering a 29% rate for monthly earnings of up to Rs467,000.

A new 32% tax slab may be introduced for individuals earning up to Rs583,000 per month.

The maximum rate of 35% is proposed for monthly income exceeding Rs583,000, equivalent to more than Rs7 million annually. The change would raise the threshold at which the top rate currently applies.

Salaried taxpayers have faced successive increases in their income tax burden during the past three years.

Their direct tax contribution has risen to more than Rs600 billion, excluding the indirect impact of increases in the petroleum levy introduced to compensate for Federal Board of Revenue collection shortfalls.

The proposed changes remain under consideration and are expected to be finalised as part of the Finance Bill 2026.