Federal / provincial budget news - Finance Act amendments, slab changes, super tax.
Punjab CM Maryam Nawaz tabled a PKR 5.9tn FY27 provincial budget framed as 'people-friendly', with a 7% salary hike for govt employees and stepped-up health and education outlays. The framework lands four days after the federal Budget 2026-27 speech.
Punjab's FY27 finance bill triples annual token tax on loader vehicles and caps sales-tax input claims at 12 monthly instalments, tightening provincial GST enforcement. The provincial measures complement federal FA 2026 broadening efforts.
Punjab's FY27 budget proposes raising the provincial sales tax on restaurant bills settled via card or digital wallet, narrowing the rate gap with cash and tightening the documentation incentive. The shift reverses an earlier digital-payment discount.
Punjab earmarked PKR 91.9bn for agriculture in its FY27 budget, funding farm mechanisation, livestock and water-course development. The allocation runs alongside continued provincial subsidies on inputs and procurement.
Sindh CM Murad Ali Shah tabled a PKR 3.56tn FY27 provincial budget with no new tax measures, a 7% pay rise and a 7% pension hike for provincial employees. The minimum wage in Sindh rises to PKR 43,000 a month.
Sindh's FY27 budget raises the provincial minimum wage to PKR 43,000 a month from PKR 40,000, the highest of any province. The hike applies to private-sector workers from 1 July 2026 and is not offset by new provincial tax measures.
The IMF rejected an Islamabad proposal to grant income-tax relief on tuition and school fees in the FY27 budget, citing revenue-target risk under the ongoing programme. The Finance Bill 2026 dropped the education credit before tabling.
The textile industry has formally warned FBR that revised sales-tax penalty provisions in the Finance Bill 2026 are punitive and unworkable for compliant exporters. APTMA called for clarification before the bill clears the National Assembly.
The finance ministry declined to disclose to Parliament the aggregate revenue cost of the salaried tax relief and surcharge withdrawal in Budget 2026-27, citing IMF programme sensitivities. Opposition MNAs sought the figure during standing committee review.
Health economists and women's rights groups welcomed the Finance Bill 2026 proposal to scrap sales tax on sanitary pads and contraceptives, calling it overdue. They urged the government to ensure the relief is passed through to retail prices.
Chambers and industry associations gave a cautious post-budget verdict on Budget 2026-27, welcoming the salaried relief and IT extension while asking for further cuts in corporate tax, super tax and energy tariffs to revive investment.
Finance Minister Muhammad Aurangzeb told a post-budget press conference the economy is transitioning from stabilisation to growth, citing the current-account surplus, declining inflation and stronger reserves. He defended the salaried-class relief as fiscally sustainable.
Budget 2026-27 extends the 0.25% Final Tax Regime on IT and IT-enabled services exports by three years, from its scheduled June 2026 sunset to 30 June 2029. The continuity gives PSEB-registered freelancers, software houses and digital exporters policy certainty on remittance taxation.
Budget 2026-27 reduces the professional income tax and minimum tax on IT exporters and services exporters from 2% to 1.25% to lift export competitiveness. The lower rate folds into the minimum tax framework and applies alongside the extended 0.25% Final Tax Regime.
FBR will bring YouTube, TikTok and Instagram creator earnings into the tax net using a formula-based minimum income: gross remuneration less deductible expenses capped at 30%, with PKR 195 per 1,000 YouTube views as the deemed baseline. Creators must file separate income declarations.
Finance Minister Muhammad Aurangzeb tabled the PKR 17.5tn consolidated Federal Budget 2026-27 in the National Assembly amid loud opposition protest. The FY27 framework targets a fiscal deficit near 4% of GDP, down from 7.8% in June 2023.
The Finance Bill 2026 abolishes the 9% surcharge previously levied on individuals earning above PKR 10m a year, a major relief for senior salaried professionals. The change rolls back a Finance Act 2025 measure introduced just twelve months ago.
FY27 salaried income tax slabs expand from six to eight bands with new intermediate rates of 25%, 29% and 32% inserted between the existing brackets. The reshuffle aims to smooth the marginal-rate jumps that hit middle-income filers.
Under Budget 2026-27 the top 35% salaried tax rate applies only above PKR 7m annual income, up from PKR 4.1m under the Finance Act 2025. The change narrows the highest band and reduces effective tax for filers earning between PKR 4.1m and PKR 7m.
The PKR 2.2m to PKR 3.2m annual salary band sees its marginal rate trimmed from 23% to 20% in Budget 2026-27, a 3 percentage point cut targeted at mid-income earners who carry the heaviest documented direct-tax burden.
Budget 2026-27 leaves the bottom three salaried slabs untouched: the PKR 600,000 tax-free threshold remains, and the symbolic 1% rate for income up to PKR 1m continues for documentation. Filers under roughly PKR 183k a month see no change.
The federal government has proposed a 7% increase in basic salaries and pensions for federal employees and retirees in the FY2026-27 budget, alongside a 10% bump in the federal minimum wage to cushion lower-paid workers from inflation.
Budget 2026-27 sets the FBR revenue target near PKR 15.2tn, up from an expected PKR 13tn collection in the outgoing year. The roughly 17% jump leans on broadening the base rather than new headline rates, per IMF-led consolidation.
Despite a 17.8% GDP share, the retail sector remains largely outside the documented tax net in Budget 2026-27, with policymakers again deferring to the Tajir Dost-style settlement. The PKR 6-7tn petroleum sector continues to be taxed via the PDL.
The Petroleum Development Levy collection target rises to PKR 1.7tn in FY27 from PKR 1.5tn projected for FY26, keeping fuel a primary revenue lever for the federation outside the standard income, sales and customs tax structures.
Pakistan's total tax expenditure dropped 3.37% to PKR 2.353tn in FY26 from PKR 2.434tn, the first decline after seven years of increases. Sales tax exemptions still rose 2.9% to PKR 1.273tn while zero-rated exemptions collapsed 89% to PKR 8.77bn.
Budget 2026-27 allocates over PKR 1.1tn for the Federal Public Sector Development Programme, with provinces also told to keep development spending tight to honour IMF-led primary surplus commitments for the new fiscal year.
Prime Minister Muhammad Shehbaz Sharif signed the Annual Budget 2026-27 documents at Parliament House, Islamabad after the Federal Cabinet approved the framework. Finance Minister to table the budget in the National Assembly at 17:00 PKT today.
Federal government, Punjab and Sindh reached consensus at the NEC on reducing development spending for the FY2026-27 budget, with any extra FBR revenue staying centralised rather than flowing to provinces under NFC shares.
President Asif Ali Zardari endorsed a public-health-led appeal to impose higher taxes on processed food products in the FY27 budget, citing rising non-communicable disease burden and the precedent set by sugary-drink levies.
A Policy Research and Advisory Council report flagged that the petroleum development levy and State Bank policy-rate hikes are now the dominant drivers of cost-push inflation, complicating FY27 budget assumptions on prices.
Analysts warn the FY27 budget may quietly tilt the NFC framework by routing extra FBR collection through centre-controlled accounts and strategic spending pools, sidestepping a formal renegotiation of the provincial revenue split.
Parliamentary Affairs Minister Tariq Fazal Chaudhry said the FY2026-27 federal budget will likely be tabled on 12 June, with National Assembly and Senate sessions slated for 10 June after PML-N and PPP aligned on the broad framework.
Pakistan's National Economic Council meeting was postponed for the third time as the centre seeks over PKR 1tn in extra strategic spending while provinces resist a freeze on NFC shares; KP estimates PKR 170-180bn in losses.
The Sustainable Development Policy Institute called on policymakers to broaden the tax base and cut tariff distortions in the FY27 budget, urging relief for salaried workers who currently shoulder a disproportionate share of direct tax.
Business leaders urged Islamabad to reinstate the 1% Final Tax Regime for exporters, arguing the shift to the Normal Tax Regime under the Finance Act 2024 has hurt outbound trade and eroded competitiveness of yarn and fabric.
IMF-led fiscal consolidation will block any meaningful corporate relief in the FY2026-27 budget, with FBR's revenue target set near PKR 15.2tn and pricing pressure on fuel and essentials expected to persist into the new year.
The National Economic Council is weighing lifting the federal PSDP from PKR 1.126tn to over PKR 1.3tn for FY27, even as roughly 25% of ongoing projects show cost overruns and nearly 79% are running behind schedule.
The Economic Coordination Committee approved over PKR 40bn in supplementary grants and a PKR 100bn facility for PSO, which faces PKR 900bn+ in receivables, while expanding bureaucratic stipends despite IMF cuts on development spend.
Pakistan has directed the four provinces to raise an additional PKR 400bn (about 40%) in FY27 revenue to meet IMF goals. Sindh must lift property tax and Punjab is told agricultural income tax remains far below potential.
Sindh, Punjab and Balochistan together pulled in PKR 599bn in tax during the first 10 months of FY26, a 35%+ jump on last year. Sindh hit 76% of its annual target by April; Punjab grew 39% to PKR 285bn.
The IMF has added 11 new structural benchmarks to Pakistan's $7bn Extended Fund Facility, covering tax administration reform, broadening the tax base, and tighter FBR collection performance metrics.