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The Finance Act 2026 gave salaried taxpayers meaningful relief for Tax Year 2027 — income earned from 1 July 2026 to 30 June 2027. Rates fall in the middle and upper bands, the top rate now starts at Rs 7 million instead of Rs 4.1 million, and the 9% surcharge on high salaries has been removed.
Tax Year 2027 slabs for salaried individuals
These rates apply where salary is more than 75% of taxable income.
| Annual taxable income (Rs) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 1% of the amount above 600,000 |
| 1,200,001 – 2,200,000 | Rs 6,000 + 11% of the amount above 1,200,000 |
| 2,200,001 – 3,200,000 | Rs 116,000 + 20% of the amount above 2,200,000 |
| 3,200,001 – 4,100,000 | Rs 316,000 + 25% of the amount above 3,200,000 |
| 4,100,001 – 5,600,000 | Rs 541,000 + 29% of the amount above 4,100,000 |
| 5,600,001 – 7,000,000 | Rs 976,000 + 32% of the amount above 5,600,000 |
| Above 7,000,000 | Rs 1,424,000 + 35% of the amount above 7,000,000 |
What changed from Tax Year 2026
- The bottom three bands (0%, 1% and 11%) are unchanged.
- The 23% band (Rs 2.2–3.2 million) falls to 20%.
- The 30% band (Rs 3.2–4.1 million) falls to 25%.
- Income above Rs 4.1 million was taxed at 35%; it is now taxed at 29%, then 32%, with 35% only above Rs 7 million.
- The 9% surcharge on salaried individuals with income above Rs 10 million has been removed.
Worked examples
| Monthly salary | Annual tax TY2027 | Monthly tax TY2027 | Annual tax TY2026 | Annual saving |
|---|---|---|---|---|
| Rs 100,000 | Rs 6,000 | Rs 500 | Rs 6,000 | — |
| Rs 150,000 | Rs 72,000 | Rs 6,000 | Rs 72,000 | — |
| Rs 250,000 | Rs 276,000 | Rs 23,000 | Rs 300,000 | Rs 24,000 |
| Rs 500,000 | Rs 1,104,000 | Rs 92,000 | Rs 1,281,000 | Rs 177,000 |
| Rs 1,000,000 | Rs 3,174,000 | Rs 264,500 | Rs 3,685,290 | Rs 511,290 |
For example, on a salary of Rs 250,000 a month (Rs 3,000,000 a year): Rs 116,000 + 20% × (3,000,000 − 2,200,000) = Rs 276,000, or Rs 23,000 a month. The Tax Year 2026 figure for Rs 1,000,000 a month includes the 9% surcharge that applied that year.
How your employer deducts it
Your employer estimates your annual salary, applies the slabs and deducts one-twelfth (adjusted for changes) from each month's pay. If your salary changes during the year, or you receive a bonus, the deduction is recalculated. You receive a withholding certificate after the year end — keep it for your return.
Practical tips for salaried taxpayers
- File your return even if tax is deducted at source. It keeps you on the Active Taxpayer List, which lowers withholding on banking, vehicles and property.
- Claim available credits, such as for donations to approved institutions and contributions to approved pension funds, subject to their conditions.
- Declare other income — bank profit, rent, dividends and capital gains are taxed under their own rules and must appear in the return.
- Reconcile your wealth statement: the increase in your net assets should be explained by your income and other receipts.
Employers: our HR consulting practice can review payroll structures and monthly salary tax deductions under the new slabs.
Figures reflect the First Schedule as amended by the Finance Act 2026, as published. Confirm the official schedule and any later notifications before relying on them, or ask us.
Frequently asked questions
What is the tax-free salary limit in Pakistan for 2026-27?
Annual taxable salary income up to Rs 600,000 (Rs 50,000 a month) is taxed at 0% for Tax Year 2027.
Is the surcharge on high salaries still payable?
No. The Finance Act 2026 removed the 9% surcharge that applied to salaried individuals with taxable income above Rs 10 million in Tax Year 2026.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.