Govt announces major tax relief for salaried class, businesses, exporters

ISLAMABAD, Jun 12 (APP): Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb on Thursday announced a series of tax relief measures for the salaried class, businesses, exporters, the construction sector, information technology industry and women’s health products in the Federal Budget 2026-27, aimed at reducing the tax burden, promoting investment, encouraging documentation of the economy and supporting economic growth.

Presenting the federal budget in the National Assembly, the finance minister said the government of Prime Minister Muhammad Shehbaz Sharif was fully aware of the difficulties being faced by both public and private sector salaried employees and had decided to provide relief to taxpayers falling in four income slabs.

He said the tax rate for salaried individuals earning between Rs2.2 million and Rs3.2 million annually was proposed to be reduced from 23 percent to 20 percent. Similarly, he said the tax rate for salaried persons with annual incomes ranging from Rs3.2 million to Rs4.1 million was proposed to be lowered from 30 percent to 25 percent.

For salaried taxpayers earning between Rs4.1 million and Rs5.6 million annually, the minister proposed a reduction in the tax rate from 35 percent to 29 percent. Likewise, the tax rate for salaried individuals with annual incomes between Rs5.6 million and Rs7 million was proposed to be reduced from 35 percent to 32 percent.

In addition to the reduction in tax rates, the finance minister announced the complete abolition of the surcharge imposed on the salaried class, describing it as a long-standing demand of employees.

The minister also announced relief in super tax for businesses. He said the government had decided to completely abolish the super tax rate of one percent applicable on income ranging from Rs150 million to Rs500 million.

He said the super tax rate for income exceeding Rs500 million was proposed to be reduced from 10 percent to 8 percent in order to facilitate small businesses and industries.

Muhammad Aurangzeb informed the House that when the proposal was presented before the federal cabinet, the prime minister and cabinet directed the government to completely abolish the super tax on exporters as well. However, he clarified that the surcharge imposed on banks, oil and gas companies and fertilizer companies would remain unchanged.

Highlighting the importance of the construction sector, the finance minister said there was no better way to create employment opportunities and accelerate industrial development than promoting construction activities.

He said growth in the construction sector generated demand for cement, steel, glass, timber, paint, tiles, hardware and more than 40 allied industries.

To encourage investment in the sector, he said the withholding tax on the purchase of property by filers was proposed to be reduced from 2.5 percent to 1.5 percent, while the tax on property sales was proposed to be reduced from 5.5 percent to 2.75 percent.

Referring to the information technology sector, the finance minister said the digital economy was among the fastest-growing industries in Pakistan. He noted that IT and IT-enabled services exports had already reached $3.8 billion and were expected to approach $4.5 billion by the end of the current fiscal year.

The minister said the concessional Final Tax Regime (FTR) rate of 0.25 percent available to IT companies was due to expire on June 30, 2026  was proposed to be extended for another three years until June 30, 2029.

Discussing export-related taxation, Muhammad Aurangzeb said exports remained a major source of income for the national economy. He said exporters were currently subject to advance income tax and minimum tax, and announced a reduction in the applicable tax burden to support export growth.

The finance minister also proposed a substantial reduction in withholding tax on transactions conducted through bank credit and debit cards. He said the existing five percent withholding tax discouraged the use of formal digital payment channels and promoted non-documented transactions.

To encourage digital payments and support the government’s drive towards a documented economy, the withholding tax was proposed to be reduced from five percent to 0.5 percent.

He said the measure would help increase the use of formal financial transactions and strengthen efforts aimed at economic documentation.

The minister further proposed the abolition of Capital Value Tax (CVT) imposed on certain overseas and non-traditional financial transactions.

Addressing women’s health issues, the finance minister announced the abolition of taxes on sanitary pads and other related products. He also announced the complete elimination of taxes on contraceptives.