ISLAMABAD: Finance Minister Senator Muhammad Aurangzeb has presented Pakistan’s third federal budget, outlining tax relief measures for salaried individuals, exporters, and real estate while setting a significantly higher revenue collection target under ongoing IMF programme conditions.
The budget arrives roughly two-thirds into the country’s current International Monetary Fund (IMF) programme, with authorities projecting 4% economic growth for FY2026–27 and inflation assumptions of around 8.2%.
Under the proposed measures, income tax slabs for salaried individuals have been revised, including an increase in the threshold for the highest 35% tax rate from Rs4.1 million to Rs7 million. A 9% surcharge on income above Rs10 million is also proposed for removal.
The Super Tax is set to be abolished for income below Rs500 million and reduced from 10% to 8% for higher income brackets, although certain sectors including banks, exploration and production (E&P), and fertiliser companies will remain subject to higher rates.
In real estate, withholding tax rates under sections 236C and 236K have been reduced to 2.75% and 1.25%, respectively, from previously higher tiered rates, in an effort to stimulate market activity.
For exporters, withholding and advance taxes on export proceeds have been reduced from 2% to 1.25%. The IT and IT-enabled services sector will retain its 0.25% tax regime for three additional years, while withholding tax on international card payments has been reduced from 5% to 0.5%.
A proposal to abolish the 1% Capital Value Tax on foreign assets held by residents exceeding Rs100 million has also been included in the budget.
However, the telecom sector faces increased withholding tax rates on certain services, rising from 6% to 7%.
On the revenue side, the Federal Board of Revenue (FBR) has set a target of Rs15.264 trillion for FY2026–27, representing a 17.6% increase over revised estimates for the current fiscal year.
Officials said the target is based on projected nominal GDP growth of approximately 12.5%, though a gap of several hundred billion rupees remains between projected collections and the announced revenue target after accounting for tax relief measures.
The budget includes enforcement-based revenue measures, including monitoring systems targeting key industries such as sugar, cement, and beverages, expected to generate around Rs61 billion, along with approximately Rs34 billion from compliance risk management systems.
Additional revenue is expected from efforts to expand the tax base, including bringing new filers into the system and expanding digital invoicing and point-of-sale integration for retailers.
Retail sector reforms include a simplified taxation scheme for small businesses with turnover up to Rs200 million, while larger retailers above this threshold will be required to integrate with the Federal Board of Revenue’s digital invoicing system.
Analysts say the budget reflects a dual approach combining tax relief measures with ambitious revenue collection assumptions, with execution of enforcement and documentation reforms seen as critical to meeting fiscal targets.