Summary
- Individuals with annual earnings ranging from Rs1.2 million to Rs2.2 million will be required to pay a fixed tax of Rs6,000 in addition to 11 percent tax on the amount exceeding Rs1.2 million.
- Similarly, taxpayers earning between Rs2.2 million and Rs3.2 million annually will pay a fixed tax of Rs116,000 along with 20 percent tax on the income exceeding Rs2.2 million.
- Individuals earning more than Rs7 million annually will be subject to a fixed tax of Rs1.424 million along with 35 percent tax on income above that threshold.
ISLAMABAD: The federal government has introduced a revised income tax structure for salaried individuals under the Finance Bill 2026, which has been approved by the National Assembly. The new tax rates will come into effect from July 1, 2026, and are aimed at providing relief to lower-income earners while restructuring tax obligations for higher-income groups.
Under the new taxation framework, individuals earning up to Rs600,000 annually will remain completely exempt from income tax. This means employees with a monthly salary of up to Rs50,000 will not have to pay any income tax.
For individuals earning between Rs600,000 and Rs1.2 million per year, a tax rate of one percent will apply. This measure is expected to keep the tax burden relatively low for lower-middle-income earners.
The government has also revised tax rates for higher income brackets. Individuals with annual earnings ranging from Rs1.2 million to Rs2.2 million will be required to pay a fixed tax of Rs6,000 in addition to 11 percent tax on the amount exceeding Rs1.2 million.
Similarly, taxpayers earning between Rs2.2 million and Rs3.2 million annually will pay a fixed tax of Rs116,000 along with 20 percent tax on the income exceeding Rs2.2 million. Previously, the applicable rate for this category stood at 23 percent, indicating a reduction in the tax burden for some salaried employees.
The revised tax structure also includes higher slabs for upper-income groups. Annual earnings between Rs3.2 million and Rs4.1 million will be taxed at a fixed amount of Rs316,000 plus 25 percent on the excess income. Those earning between Rs4.1 million and Rs5.6 million will pay Rs541,000 plus 29 percent on the additional amount.
For annual incomes ranging from Rs5.6 million to Rs7 million, a fixed tax of Rs976,000 and 32 percent on the excess amount will apply. Individuals earning more than Rs7 million annually will be subject to a fixed tax of Rs1.424 million along with 35 percent tax on income above that threshold.
The government says the revised tax regime is designed to improve tax collection while offering relief to low- and middle-income salaried employees. The new rates will be implemented from the beginning of the next fiscal year.
