Salaried class sees tax cuts, pay raise

The federal budget 2026-27 unveiled a relief package for the salaried person, including lower income tax rate, abolition of the 9% surcharge, and a 7% increase in the pays and pensions of the government employees.

Presenting the budget in the National Assembly, Finance Minister Muhammad Aurangzeb said the government was fully aware of the financial difficulties facing the public and private sector employees and had decided to provide tax relief by restructuring salaried taxpayers into four income slabs.

Under the proposed measures, the tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually will be reduced from 23% to 20%. For those with annual incomes between Rs3.2 million and Rs4.1 million, the rate will be lowered from 30% to 25%.

Similarly, taxpayers earning between Rs4.1 million and Rs5.6 million annually will see their tax rate reduced from 35% to 29%, while those with incomes ranging from Rs5.6 million to Rs7 million will benefit from a reduction from 35% to 32%.

The finance minister also announced the complete abolition of the surcharge imposed on salaried taxpayers, describing it as a long-standing demand. The surcharge had already been reduced from 10% to 9% in the previous budget and is now proposed to be eliminated altogether.

As part of broader relief measures, the government proposed a 7% ad hoc increase in salaries of federal government employees and a 7% rise in pensions for retired federal employees. The minister announced a 10% increase in the minimum monthly wage to support workers and improve purchasing power.

Overall, the relief forms a central part of the government's budget strategy for the coming fiscal year, combining tax reductions, income support measures and sector-specific incentives aimed at promoting investment, economic activity and documentation of the economy, according to budget documents.

(WITH INPUT FROM APP)