Pakistan Begins Implementation of FY2026-27 Budget With Tax Relief and New Fiscal Measures

Pakistan has officially begun implementing its Fiscal Year 2026-27 budget from July 1, introducing a range of tax reforms and relief measures. According to the Federal Board of Revenue (FBR), individuals earning up to Rs600,000 annually will remain exempt from income tax, while tax rates in several middle-income slabs have been reduced to provide relief to salaried employees. The maximum income tax rate remains unchanged at 35 percent.

The new budget also introduces a 5 percent withholding tax on income earned through digital platforms, including YouTube, Facebook, TikTok, and other social media services. In the property sector, the advance tax on purchases has been set at 1.25 percent, while the withholding tax on property sales has been fixed at 2.75 percent. The FBR also announced the abolition of the Section 7E tax on property, with reduced property transaction taxes taking effect from July 1.

The budget further abolishes the super tax for most businesses with annual income of up to Rs5 billion, while reducing the rate from 10 percent to 8 percent for higher-income businesses. Separate tax rates will continue to apply to sectors such as banking, oil and gas, and fertilizer. Other measures include a 1 percent tax on certain retail businesses with annual turnover of up to Rs2 billion, up to 40 percent federal excise duty on imported vehicles above 2,000cc, higher duties on premium imported electric vehicles, reduced customs duties on various raw materials and industrial goods, and stricter conditions for non-filers in financial and business transactions.