Pakistan Budget 2025-26 vs 2026-27: Complete Comparison
A sector-by-sector comparison of Pakistan’s federal budget changes — salaried tax, freelancers & IT, business, property, cars, solar, defence, retail and more. FY 2025-26 reflects the Finance Act 2025; FY 2026-27 figures are from the Finance Bill 2026 (June 2026), effective 1 July 2026 pending parliamentary approval.
Federal budget overview
Macro fiscal targets and totals for the outgoing and proposed budgets.
| Indicator | FY 2025-26 | FY 2026-27 | Impact |
|---|---|---|---|
| Total federal budget outlay | Rs. 18.42 trillion (FY 2025-26 budget) | Rs. 18.77 trillion (proposed) | +1.9% outlay |
| FBR revenue target | Rs. 12,983 billion | Rs. 15,264 billion (+17.6%) | Higher collection target |
| Fiscal deficit target | ~4.2% of GDP (outgoing year) | 3.6% of GDP (proposed) | Tighter consolidation |
| GDP growth target | 3.7% (achieved, per FM speech) | 4.0% (proposed) | Higher growth aim |
| Inflation projection | ~5.5% (outgoing) | 8.2% average (projected) | Higher inflation forecast |
| Debt servicing | Largest expenditure head (outgoing) | Rs. 8,054 billion allocated | Still dominant outlay |
Salaried individuals & employees
The headline relief package targets salaried workers: restructured income tax slabs from six to eight bands, lower marginal rates between Rs. 2.2M and Rs. 7M annually, and abolition of the 9% surcharge above Rs. 10M. Federal civil servants also receive a 7% salary increase and 7% pension hike.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Income tax slabs (salaried) | 6 progressive slabs under Finance Act 2025 | 8 slabs with new 25%, 29% and 32% bands (proposed) | Restructured |
| Tax-free annual threshold | Rs. 600,000 | Rs. 600,000 | No change |
| PKR 2.2M–3.2M marginal rate | 23% | 20% | −3 pp |
| PKR 3.2M–4.1M marginal rate | 30% | 25% | −5 pp |
| 35% top rate threshold | Above Rs. 4.1 million | Above Rs. 7 million | Threshold raised |
| Surcharge on income tax | 9% when annual income exceeds Rs. 10M | Proposed abolished for salaried class | Abolished |
| Federal government salaries | Existing pay scales | 7% ad-hoc increase proposed | +7% salaries |
| Federal pensions | Existing pension rates | 7% increase proposed | +7% pensions |
| Minimum monthly wage | Previous minimum wage level | 10% increase proposed | +10% minimum wage |
- Employees earning up to roughly Rs. 183,000/month see no income tax change — only the lower three slabs are unchanged.
- Use our salary tax calculator to model your exact take-home under both fiscal years.
Freelancers, IT sector & digital exports
PSEB-registered IT exporters and freelancers retain the concessional 0.25% Final Tax Regime (FTR) for three more years. International card payments face sharply lower withholding tax. New levies target social media earnings and foreign digital services.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| PSEB IT export FTR (Section 154A) | 0.25% final tax; due to expire 30 June 2026 | 0.25% extended to 30 June 2029 (proposed) | Extended 3 years |
| Combined export tax on proceeds | 2% (1% WHT + 1% advance tax) | 1.25% (proposed) | Reduced |
| International credit/debit card WHT | 5% on overseas transactions (filers) | 0.5% (proposed) | 5% → 0.5% |
| Non-PSEB freelance / business income | Non-salaried progressive slabs (15%–45%) + 10% surcharge above Rs. 10M | Same slab structure; salaried surcharge abolition does not apply to business income | Slabs unchanged |
| Social media / influencer earnings | Taxed under general income rules | 5% withholding tax proposed on platform payments | New 5% WHT |
| Foreign digital services vendors | Digital Presence Proceeds Tax (5% on certain foreign vendors) | 5% digital services tax on significant digital presence (proposed) | New digital levy |
| EV manufacturing plant & machinery | Concessional duties under EV policy | 0% customs duty on one-time plant imports for new EV projects (proposed) | New incentive |
- Freelancers remitting through Pakistani banks with PSEB registration benefit most from the extended 0.25% FTR.
- Without PSEB registration, foreign receipts fall under non-salaried slabs — significantly higher above Rs. 2.2M annually.
Business, companies & AOPs
Corporate super tax is abolished for firms earning up to Rs. 500 million and cut for larger companies (except banks, E&P and fertiliser). Small retailers get a simplified 1% turnover tax replacing the Tajir Dost scheme.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Super tax (Section 4C) up to Rs. 500M | Progressive 1%–7.5% on Rs. 150M–500M income | Abolished for income up to Rs. 500M (proposed) | Abolished |
| Super tax above Rs. 500M | 10% of income | 8% (proposed); banks, E&P & fertiliser exempt from cut | 10% → 8% |
| Small retailer fixed tax | Tajir Dost Scheme (location-based advance tax) | 1% of annual turnover up to Rs. 200M; min Rs. 25,000/year (proposed) | New fixed-tax scheme |
| Retailer scheme benefits | POS integration and audits under Tajir Dost | Simplified return, POS exemption, limited audits (proposed) | Easier compliance |
| Distributor / wholesaler minimum tax | 0.25% of turnover | 0.5% (proposed) | Doubled |
| Company income tax (general) | 29% standard corporate rate | 29% (unchanged) | No change |
| Small company rate | 20% (qualifying companies) | 20% (unchanged) | No change |
| AOP / sole proprietor surcharge | 10% surcharge on tax when income exceeds Rs. 10M | Status under Finance Bill 2026 unclear for non-salaried; salaried surcharge abolished | Verify for AOPs |
Property & real estate
Major relief for the property sector: Section 7E deemed income tax abolished, Capital Value Tax on foreign assets removed, and flat lower withholding taxes on property transfers for filers.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Section 7E deemed income tax | 1% of fair market value on non-earning property (contested in courts) | Completely abolished (proposed) | Abolished |
| Capital Value Tax (foreign assets) | CVT on declared foreign movable/immovable assets | Abolished (proposed) | Abolished |
| Advance tax on property sale (filers, S. 236C) | 4.5%–5.5% sliding scale by value | Flat 2.75% (proposed) | Roughly halved |
| Advance tax on property purchase (filers, S. 236K) | 1.5%–2.5% sliding scale | Flat 1.25% (proposed) | Reduced |
| Combined filer transaction cost | Up to ~8% combined buyer + seller WHT | ~4% combined (2.75% + 1.25%) (proposed) | ~50% lower |
| Inherited property cost basis | Historical acquisition cost of deceased | Stepped-up basis at FMV on date of death (proposed) | CGT relief |
| Non-filer property WHT | Higher penal rates for late/non-filers | Sale WHT 2.75%; Category A penal multipliers proposed abolished | Simplified |
Cars, vehicles & automobiles
Locally assembled EVs and hybrids keep concessional sales tax. Imported luxury EVs face new tiered FED. Islamabad token taxes rise and shift to invoice-value basis for larger engines. New FED on imported petrol vehicles 2000cc–3000cc.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Locally manufactured EV sales tax | 1% (Eighth Schedule) | 1% extended to 30 June 2027 | Extended |
| Locally manufactured HEV (up to 1800cc) | 8.5% sales tax | 8.5% extended to 30 June 2027 | Extended |
| EV CKD component customs duty | 1% on EV-specific parts | 1% extended to 30 June 2027 | Extended |
| Imported CBU electric vehicles | 25% customs concession below $50,000; limited FED structure | Tiered FED: 0% up to Rs. 20M; 30% for Rs. 20–30M; 40% above Rs. 30M | Luxury EVs taxed more |
| Imported petrol vehicles (2000cc–3000cc) | Existing customs + FED structure | New FED proposed on imported 2000cc–3000cc vehicles | New FED |
| Imported vehicles above 2000cc | Up to ~40% FED on luxury imports | 40%–41% FED; luxury EVs also covered | Higher luxury tax |
| ICT token tax (up to 1000cc) | Previous flat token rates | Rs. 20,000 annual token tax (proposed) | Increased |
| ICT token tax (above 1000cc) | Engine-capacity based flat rates | Based on invoice / import value (proposed) | Value-based |
Solar panels & renewable energy
Despite IMF pressure to raise GST to 18%, the government maintained solar tax stability. No fresh taxes on panels were introduced — a relief for households and businesses switching to renewable power.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Sales tax on imported solar panels | 10% GST (after reduction from proposed 18%) | No increase; existing structure maintained (proposed) | Stability |
| Proposed 18% GST on solar | Debated under IMF programme | Rejected; not included in Finance Bill 2026 | Hike avoided |
| Solar panels & photovoltaic cells | Listed among major tax-exempt / concessional items | Continue as tax-exempt / stable treatment (proposed) | No fresh tax |
| FBR official position | 10% GST on imports in place | FBR confirms no new solar panel taxes in Budget 2026-27 | Confirmed |
- Industry stakeholders had feared an 18% GST — the budget maintains affordability for solar adoption.
Defence, military & national security
Defence allocation rises 17.65% to Rs. 3 trillion amid regional security pressures. Military pensions are budgeted separately at Rs. 822 billion. Procurement and physical assets see the largest jump (+39.6%).
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Defence services allocation | Rs. 2.558 trillion (budgeted) | Rs. 3.000 trillion (proposed, +17.65%) | +Rs. 442B |
| Share of federal budget | ~14% of federal outlay | ~16% of Rs. 18.77T outlay | Larger share |
| Defence as % of GDP | Slightly below 2% | ~2.08% of projected GDP | Above 2% again |
| Salaries & allowances (serving personnel) | Rs. 846 billion | Rs. 968 billion (+14.36%) (proposed) | +Rs. 122B |
| Physical assets / procurement | Rs. 663 billion | Rs. 926 billion (+39.6%) (proposed) | Largest hike |
| Operating expenses | Rs. 635 billion (approx.) | Rs. 743 billion (proposed) | Increased |
| Civil works | Rs. 261 billion (approx.) | Rs. 363 billion (proposed) | Increased |
| Military pensions (separate head) | Rs. 742 billion | Rs. 822 billion (+10.8%) (proposed) | Not in defence total |
| Civil pensions (separate head) | Part of Rs. 1,169T total pensions | Rs. 272 billion civil pensions (proposed) | Separate allocation |
- Military pensions are excluded from the Rs. 3 trillion defence services figure — total security-related spending is higher.
- FM cited Operation Bunyan-un-Marsoos and regional tensions as context for the increase.
Retail, consumers & other measures
Additional budget measures cover consumer goods, sin taxes, travel, exports and customs duty reforms affecting everyday prices and business costs.
| Measure | FY 2025-26 | FY 2026-27 (proposed) | Impact |
|---|---|---|---|
| Women's sanitary products & contraceptives | Subject to sales tax / duties | Tax abolished (proposed) | Tax removed |
| E-cigarette / vape e-liquid FED | Rs. 10,000 per kg | Rs. 16,500 per kg (proposed) | +65% |
| Business-class international air travel FED | FED applicable | Abolished (proposed) | Abolished |
| Export tax on proceeds | 2% | 1.25% (proposed) | Reduced |
| Industrial raw materials customs duty | Various rates on 100+ categories | Eliminated on 100+ industrial raw material categories (proposed) | Duty-free inputs |
| White spirit / mineral turpentine | No specific FED | Rs. 80/litre FED (proposed, anti-adulteration) | New FED |
| Petroleum relief (FY 2025-26) | Rs. 128 billion absorbed by government (per FM) | Not a permanent tax change; one-off relief referenced | Separate measure |
Detailed salaried tax comparison
In-depth slab-by-slab analysis and worked examples for salaried individuals. Select FY 2025-2026 or FY 2026-2027 in our income tax calculator to model your own salary.
Marginal rate by income band
| Annual income | FY 2025-26 | FY 2026-27 | Change |
|---|---|---|---|
| Up to Rs. 600,000 | 0% | 0% | No change |
| Rs. 600,001 – 1,200,000 | 1% | 1% | No change |
| Rs. 1,200,001 – 2,200,000 | 11% | 11% | No change |
| Rs. 2,200,001 – 3,200,000 | 23% | 20% | −3 percentage points |
| Rs. 3,200,001 – 4,100,000 | 30% | 25% | −5 percentage points |
| Rs. 4,100,001 – 5,600,000 | 35% | 29% | −6 percentage points |
| Rs. 5,600,001 – 7,000,000 | 35% | 32% | New band (was 35%) |
| Above Rs. 7,000,000 | 35% | 35% | Same rate; threshold raised |
Full slab tables
FY 2025-2026
| Up to Rs. 600,000 | 0% |
| Rs. 600,001 – Rs. 1,200,000 | 1% |
| Rs. 1,200,001 – Rs. 2,200,000 | Rs. 6,000 + 11% above Rs. 1,200,000 |
| Rs. 2,200,001 – Rs. 3,200,000 | Rs. 116,000 + 23% above Rs. 2,200,000 |
| Rs. 3,200,001 – Rs. 4,100,000 | Rs. 346,000 + 30% above Rs. 3,200,000 |
| Above Rs. 4,100,000 | Rs. 616,000 + 35% above Rs. 4,100,000 |
+9% surcharge on tax when income exceeds Rs. 10,000,000.
FY 2026-2027 (proposed)
| Up to Rs. 600,000 | 0% |
| Rs. 600,001 – Rs. 1,200,000 | 1% |
| Rs. 1,200,001 – Rs. 2,200,000 | Rs. 6,000 + 11% above Rs. 1,200,000 |
| Rs. 2,200,001 – Rs. 3,200,000 | Rs. 116,000 + 20% above Rs. 2,200,000 |
| Rs. 3,200,001 – Rs. 4,100,000 | Rs. 316,000 + 25% above Rs. 3,200,000 |
| Rs. 4,100,001 – Rs. 5,600,000 | Rs. 541,000 + 29% above Rs. 4,100,000 |
| Rs. 5,600,001 – Rs. 7,000,000 | Rs. 976,000 + 32% above Rs. 5,600,000 |
| Above Rs. 7,000,000 | Rs. 1,424,000 + 35% above Rs. 7,000,000 |
Example savings by monthly salary
Gross salary over 12 months; FY 2025-26 includes 9% surcharge where applicable.
| Monthly salary | Tax FY 2025-26 | Tax FY 2026-27 | You save |
|---|---|---|---|
| Rs. 100,000 | Rs. 6,000 | Rs. 6,000 | — |
| Rs. 125,000 | Rs. 39,000 | Rs. 39,000 | — |
| Rs. 150,000 | Rs. 72,000 | Rs. 72,000 | — |
| Rs. 175,000 | Rs. 105,000 | Rs. 105,000 | — |
| Rs. 200,000 | Rs. 162,000 | Rs. 156,000 | Rs. 6,000 / yr (Rs. 500 / mo) |
| Rs. 225,000 | Rs. 231,000 | Rs. 216,000 | Rs. 15,000 / yr (Rs. 1,250 / mo) |
| Rs. 250,000 | Rs. 300,000 | Rs. 276,000 | Rs. 24,000 / yr (Rs. 2,000 / mo) |
| Rs. 300,000 | Rs. 466,000 | Rs. 416,000 | Rs. 50,000 / yr (Rs. 4,167 / mo) |
| Rs. 350,000 | Rs. 651,000 | Rs. 570,000 | Rs. 81,000 / yr (Rs. 6,750 / mo) |
| Rs. 400,000 | Rs. 861,000 | Rs. 744,000 | Rs. 117,000 / yr (Rs. 9,750 / mo) |
| Rs. 450,000 | Rs. 1,071,000 | Rs. 918,000 | Rs. 153,000 / yr (Rs. 12,750 / mo) |
| Rs. 500,000 | Rs. 1,281,000 | Rs. 1,104,000 | Rs. 177,000 / yr (Rs. 14,750 / mo) |
| Rs. 600,000 | Rs. 1,701,000 | Rs. 1,494,000 | Rs. 207,000 / yr (Rs. 17,250 / mo) |
| Rs. 750,000 | Rs. 2,331,000 | Rs. 2,124,000 | Rs. 207,000 / yr (Rs. 17,250 / mo) |
| Rs. 833,333 | Rs. 2,680,998 | Rs. 2,473,998 | Rs. 207,000 / yr (Rs. 17,250 / mo) |
| Rs. 900,000 | Rs. 3,227,490incl. Rs. 266,490 surcharge | Rs. 2,754,000 | Rs. 473,490 / yr (Rs. 39,458 / mo) |
| Rs. 1,000,000 | Rs. 3,685,290incl. Rs. 304,290 surcharge | Rs. 3,174,000 | Rs. 511,290 / yr (Rs. 42,608 / mo) |
Bottom line: who wins in Budget 2026-27?
Biggest relief
- • Salaried earners Rs. 200k–1M+/month
- • Property buyers & sellers (Section 7E gone)
- • PSEB freelancers & IT exporters
- • Companies under Rs. 500M (super tax abolished)
- • Small retailers (1% turnover tax)
Higher costs / new taxes
- • Luxury imported EVs & petrol cars (new/higher FED)
- • ICT vehicle token tax reforms
- • Social media influencers (5% WHT proposed)
- • Distributors / wholesalers (min tax doubled)
- • E-cigarette liquids (+65% FED)
Frequently asked questions
What are the main changes in Pakistan Budget 2026-27 vs 2025-26?
Budget 2026-27 proposes salaried tax relief (restructured slabs, surcharge abolished), property sector cuts (Section 7E and CVT abolished, lower transfer taxes), extended 0.25% IT/freelancer FTR to 2029, super tax abolished for companies up to Rs. 500M, fixed 1% tax for small retailers, stable solar taxes, higher defence allocation (Rs. 3T), and new taxes on luxury imported EVs and social media earnings.
What changed in Pakistan income tax from FY 2025-26 to FY 2026-27 for salaried workers?
Salaried tax slabs expand from 6 to 8 bands. Rates fall for incomes between Rs. 2.2M and Rs. 7M, the 35% top rate now starts above Rs. 7M, and the 9% surcharge above Rs. 10M is proposed abolished. Federal employees get 7% salary and pension increases; minimum wage rises 10%.
Do freelancers get tax relief in Budget 2026-27?
Yes for PSEB-registered IT exporters: the 0.25% Final Tax Regime is extended to 30 June 2029, export tax drops from 2% to 1.25%, and international card withholding falls from 5% to 0.5%. Non-PSEB freelancers still face non-salaried slabs. A new 5% withholding tax on social media earnings is proposed.
Is there new tax on solar panels in Budget 2026-27?
No. Despite proposals to raise GST to 18%, the government maintained the existing solar tax structure. FBR confirmed no fresh taxes on solar panels or photovoltaic cells in Finance Bill 2026.
How does Budget 2026-27 affect cars and electric vehicles?
Local EV/HEV concessions are extended to June 2027. Imported CBU EVs face tiered FED: 0% up to Rs. 20M, 30% for Rs. 20–30M, 40% above Rs. 30M. New FED applies to imported 2000cc–3000cc petrol vehicles. Islamabad token taxes increase, with value-based tax above 1000cc.
What is Pakistan's defence budget for FY 2026-27?
Rs. 3 trillion is proposed for defence services (+17.65%), with Rs. 926 billion for physical assets/procurement (+39.6%). Military pensions are separate at Rs. 822 billion (+10.8%), not included in the Rs. 3T defence total.
What property tax changes are in Finance Bill 2026?
Section 7E deemed income tax on property is abolished. CVT on foreign assets is removed. Property sale WHT for filers drops to flat 2.75% and purchase WHT to 1.25%, roughly halving combined transaction costs.
When do Budget 2026-27 tax changes take effect?
Proposed measures apply from 1 July 2026 once the Finance Bill 2026 is passed by the National Assembly and notified by FBR. Until then, FY 2025-26 rates under the Finance Act 2025 remain in force.