Budget 2026-27 lowered income tax for salaried people with taxable income above Rs 2.2 million a year. Anyone earning less pays the same as before. The budget cuts the rates on the middle and upper bands, splits the old top band (everything above Rs 4.1 million) into three, and removes the 9% surcharge on salaried incomes above Rs 10 million. The tax-free limit stays at Rs 600,000 a year (Rs 50,000 a month), and the new slabs apply to salary paid from 1 July 2026, which falls in tax year 2027.
Salaried tax slabs: FY 2026-27 compared with FY 2025-26
Both columns apply to annual taxable income from salary. FY 2025-26 is tax year 2026 (income from 1 July 2025 to 30 June 2026). FY 2026-27 is tax year 2027 (income from 1 July 2026 to 30 June 2027).
| Annual taxable income (Rs) | FY 2025-26 (tax year 2026) | FY 2026-27 (tax year 2027) |
|---|---|---|
| Up to 600,000 | 0% | 0% |
| 600,001 – 1,200,000 | 1% of the amount above 600,000 | 1% of the amount above 600,000 |
| 1,200,001 – 2,200,000 | Rs 6,000 + 11% above 1,200,000 | Rs 6,000 + 11% above 1,200,000 |
| 2,200,001 – 3,200,000 | Rs 116,000 + 23% above 2,200,000 | Rs 116,000 + 20% above 2,200,000 |
| 3,200,001 – 4,100,000 | Rs 346,000 + 30% above 3,200,000 | Rs 316,000 + 25% above 3,200,000 |
| 4,100,001 – 5,600,000 | Rs 616,000 + 35% above 4,100,000 | Rs 541,000 + 29% above 4,100,000 |
| 5,600,001 – 7,000,000 | Rs 616,000 + 35% above 4,100,000 | Rs 976,000 + 32% above 5,600,000 |
| Above 7,000,000 | Rs 616,000 + 35% above 4,100,000 | Rs 1,424,000 + 35% above 7,000,000 |
| Surcharge | 9% of the tax where taxable income exceeds Rs 10,000,000 | None for salaried individuals |
The FY 2026-27 column is the salaried table as gazetted in the Finance Act 2026, which amends the First Schedule to the Income Tax Ordinance, 2001 for tax year 2027. You can see both full tables on the tax slabs page.
What Budget 2026-27 changed for salaried individuals
- Lower rates from Rs 2.2 million to Rs 4.1 million. The rate on the 2.2 to 3.2 million band falls from 23% to 20%. The rate on the 3.2 to 4.1 million band falls from 30% to 25%.
- The old top band is split into three. Until now, all income above Rs 4.1 million was taxed at 35%. From FY 2026-27 the rate is 29% from Rs 4.1 million to 5.6 million and 32% from Rs 5.6 million to 7 million. The 35% rate only starts above Rs 7 million.
- No surcharge for salaried individuals. In FY 2025-26, salaried people with taxable income above Rs 10 million paid an extra 9% of their tax. The Finance Act 2026 replaces that 9% surcharge with "no surcharge shall be payable" for salaried individuals from FY 2026-27.
These things stay the same: the Rs 600,000 tax-free limit, the 1% and 11% bands up to Rs 2.2 million, and the 35% top rate.
Impact by income level
The figures below come from the TaxWizard tax engine. Each one is the annual income tax on a gross salary, assuming no exempt allowances, deductions or tax credits.
| Monthly salary (Rs) | Annual salary (Rs) | Tax FY 2025-26 (Rs) | Tax FY 2026-27 (Rs) | Annual saving (Rs) |
|---|---|---|---|---|
| 50,000 | 600,000 | 0 | 0 | 0 |
| 100,000 | 1,200,000 | 6,000 | 6,000 | 0 |
| 150,000 | 1,800,000 | 72,000 | 72,000 | 0 |
| 200,000 | 2,400,000 | 162,000 | 156,000 | 6,000 |
| 300,000 | 3,600,000 | 466,000 | 416,000 | 50,000 |
| 500,000 | 6,000,000 | 1,281,000 | 1,104,000 | 177,000 |
| 1,000,000 | 12,000,000 | 3,685,290 (incl. 9% surcharge) | 3,174,000 (no surcharge) | 511,290 |
Two worked examples
Rs 300,000 a month (Rs 3,600,000 a year). This income falls in the 3.2 to 4.1 million band in both years, so Rs 400,000 of it is above Rs 3,200,000.
- FY 2025-26: Rs 346,000 + 30% of Rs 400,000 = Rs 466,000
- FY 2026-27: Rs 316,000 + 25% of Rs 400,000 = Rs 416,000
Rs 1,000,000 a month (Rs 12,000,000 a year).
- FY 2025-26: Rs 616,000 + 35% of Rs 7,900,000 (the amount above 4.1 million) = Rs 3,381,000. Income is above Rs 10 million, so the 9% surcharge of Rs 304,290 applies, for a total of Rs 3,685,290.
- FY 2026-27: Rs 1,424,000 + 35% of Rs 5,000,000 (the amount above 7 million) = Rs 3,174,000. There is no surcharge.
What this means at each income level
- Up to Rs 2.2 million a year: no change. The bands up to this point are the same in both years.
- Rs 2.2 million to Rs 4.1 million: a small saving at the bottom of this range, growing as income rises, because of the lower 20% and 25% rates.
- Rs 4.1 million to Rs 7 million: the biggest change in rates. Income that was taxed at 35% is now taxed at 29% or 32%.
- Above Rs 7 million: the top rate is still 35%, but it now applies to a smaller share of income. Anyone above Rs 10 million also no longer pays the surcharge, which is why the saving jumps at the top of the table.
To look up the tax on your own monthly salary under either year, use the salary tax guide. If you claim tax credits or deductions, your figures will be lower than the table; see legal ways to reduce your tax.
Which year's slabs apply to you
The new budget does not change the return you are filing now.
- Your tax year 2026 return covers income from 1 July 2025 to 30 June 2026. It is normally due by 30 September 2026 and uses the FY 2025-26 slabs, including the 9% surcharge if your taxable income was above Rs 10 million. See the filing deadline guide for how to file and for any extension.
- Salary paid from July 2026 falls in tax year 2027. Your employer should deduct tax from it using the FY 2026-27 slabs. You will reconcile it in the tax year 2027 return, filed in 2027.
Check your payslips from July 2026 onwards. If the monthly deduction has not come down and your income is above Rs 2.2 million, ask your HR or payroll team which slabs they are using. If more tax is deducted over the year than you owe, you can claim the difference as a refund when you file the return for that year. The withholding tax guide explains how to claim credit for tax already deducted.
What did not change, or is not yet confirmed
- Non-salaried slabs. The non-salaried individual slabs (15% to 45%, with a 10% surcharge above Rs 10 million) are unchanged from FY 2025-26. Check the tax slabs page for the current position. The surcharge removal in Budget 2026-27 applies only to salaried individuals; non-salaried individuals with taxable income above Rs 10 million still pay the 10% surcharge.
- Other budget measures. This page covers only the income tax slabs for salaried individuals. Before relying on any other Budget 2026-27 measure, such as sales tax, property taxes or withholding rates, check it against the text of the Finance Act 2026.
- Pre-budget forecasts. Before the budget, many articles, including earlier versions of pages on this site, predicted a higher tax-free limit, higher top rates or new taxes on property, agriculture or inheritance. The salaried slabs in Budget 2026-27 keep the Rs 600,000 limit and the 35% top rate. Treat any other forecast as unconfirmed unless it appears in the Finance Act.
Frequently asked questions
Is the tax-free limit for salaried people still Rs 600,000?
Yes. In both FY 2025-26 and FY 2026-27, salaried individuals pay no income tax on annual taxable income up to Rs 600,000 (Rs 50,000 a month).
I earn Rs 150,000 a month. Does the budget change my tax?
No. At Rs 1,800,000 a year your tax is Rs 72,000 in both years, because the bands up to Rs 2.2 million did not change.
Has the surcharge been removed for everyone?
No. Budget 2026-27 removes the surcharge only for salaried individuals. Non-salaried taxpayers above Rs 10 million still pay a 10% surcharge.
Which slabs should I use for the return I am filing in 2026?
The FY 2025-26 slabs. The return filed in 2026 is for tax year 2026, which covers income earned up to 30 June 2026. The FY 2026-27 slabs apply to the return you file in 2027.
Are the FY 2026-27 figures final?
Yes. They are the slabs as gazetted in the Finance Act 2026 (26 June 2026), which amends the First Schedule to the Income Tax Ordinance, 2001 for tax year 2027 onwards.
This is general information and tax rules change; check FBR's current notifications or ask a tax adviser about your own situation.
References
- Income Tax Ordinance, 2001 (amended up to 31.07.2025) — First Schedule Part I Division I (salaried table), section 4(4AB) · accessed 2026-09-25
- Finance Act 2026 (gazetted 26 June 2026) — amendment to First Schedule Part I Division I salaried table and removal of 9% salaried surcharge · accessed 2026-09-25