ISLAMABAD: Pakistan is expected to unveil a federal budget of around Rs18 trillion for the fiscal year 2026-27 when Finance Minister presents it on June 12, according to media reports citing informed sources.
Salary and Tax Relief
Government employees could receive a 10% salary increase under the new budget. The government is also considering tax relief for salaried individuals, particularly those earning between Rs1.2 million and Rs2.2 million annually, through lower income tax rates.
Officials are also reviewing a reduction in the Super Tax, although the Corporate Income Tax is likely to remain unchanged.
Consumer Goods and Vehicles
Proposed tax revisions may reduce prices of several everyday products, including:
Cosmetics
Face powder
Mascara
Shampoo
Soap
In contrast, electric vehicles (EVs), hybrid cars, and plug-in hybrid vehicles could become more expensive if new taxation measures are approved.
Revenue Targets
The government is expected to set the following tax collection goals:
Direct Taxes: Rs7.413 trillion
Sales Tax: Rs4.727 trillion
Customs Duty: Rs1.651 trillion
Federal Excise Duty: Rs1.043 trillion
The Petroleum Development Levy (PDL) target may rise to Rs1.727 trillion, an increase of Rs259 billion compared to the current fiscal year’s target. A Gas Surcharge collection target of Rs151 billion is also under consideration.
Changes for Salaried Individuals
Key proposals include:
Tax relief for employees earning monthly salaries of Rs100,000, Rs200,000, and Rs300,000
Revised tax structure for annual incomes up to Rs3.6 million
Possible elimination of the 10% surcharge on annual incomes exceeding Rs10 million
Expansion of salary tax slabs from six to eight categories
Government Spending Plans
The proposed allocations include:
Rs1.07 trillion for non-development expenditures of federal ministries
More than Rs1.1 trillion for pension payments
Rs838 billion for the Benazir Income Support Programme (BISP)
The quarterly BISP payment is expected to increase from Rs13,000 to Rs14,500.
Automobile Sector Reforms
The budget may introduce an Environmental Levy on luxury petrol and diesel vehicles:
10% levy on vehicles with engine capacities between 2001cc and 3000cc
19.5% levy on vehicles exceeding 3000cc
The government estimates these levies could generate Rs25.8 billion in revenue.
To encourage domestic automobile production, several tax concessions are under review:
Tax on imported raw materials may be reduced to 1%
Import duty on manufacturing parts could fall from 10% to 5%
Tax on imported auto parts for local assembly may decrease from 20% to 10%
Automakers would also be required to comply with 62 safety and quality standards, while companies failing to increase localization of parts could lose tax incentives.
For imported SUVs and jeeps, the current 50% tax rate may be cut by 2 percentage points initially, with a gradual reduction to 40% over the next five years.
Meanwhile, the sales tax on locally manufactured hybrid vehicles is expected to rise from 8.5% to 18%.
Climate and Fuel Measures
The government is also considering doubling the Climate Levy on petroleum products from Rs2.5 per litre to Rs5 per litre, aiming to boost climate-related revenue and support environmental initiatives.
All of these measures remain proposals and are subject to approval when the federal budget for 2026-27 is officially presented.
