New income tax slabs effective from July 1, 2026, include lower rates for salaried individuals and tax relief for pensioners
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax rates applicable to salaried individuals for Tax Year 2027, effective from July 1, 2026, following the release of the updated Income Tax Ordinance, 2001, incorporating amendments made up to June 30, 2026.
The revised tax rates apply to individuals whose income chargeable under the head “Salary” constitutes more than 75% of their total taxable income.
The updated tax slabs reflect the amendments introduced through the Finance Act, 2026, and will be used to determine the annual income tax liability of salaried taxpayers during Tax Year 2027.
Salary tax rates for Tax Year 2027
The applicable income tax rates are as follows:
| Annual Taxable Income | Tax Payable |
| Up to Rs600,000 | Nil |
| Exceeds Rs600,000 but does not exceed Rs1,200,000 | 1% of the amount exceeding Rs600,000 |
| Exceeds Rs1,200,000 but does not exceed Rs2,200,000 | Rs6,000 + 11% of the amount exceeding Rs1,200,000 |
| Exceeds Rs2,200,000 but does not exceed Rs3,200,000 | Rs116,000 + 20% of the amount exceeding Rs2,200,000 |
| Exceeds Rs3,200,000 but does not exceed Rs4,100,000 | Rs316,000 + 25% of the amount exceeding Rs3,200,000 |
| Exceeds Rs4,100,000 but does not exceed Rs5,600,000 | Rs541,000 + 29% of the amount exceeding Rs4,100,000 |
| Exceeds Rs5,600,000 but does not exceed Rs7,000,000 | Rs976,000 + 32% of the amount exceeding Rs5,600,000 |
| Exceeds Rs7,000,000 | Rs1,424,000 + 35% of the amount exceeding Rs7,000,000 |
The FBR said employers are required to apply these revised tax slabs while deducting income tax from employees’ salaries during Tax Year 2027.
Tax relief for pensioners
The updated law also provides significant tax relief for pensioners by exempting pension income up to a specified threshold.
Under the revised provisions:
| Annual Pension Income | Tax Rate |
| Up to Rs10 million | Nil |
| Exceeds Rs10 million | 5% of the amount exceeding Rs10 million |
Accordingly, pension income of up to Rs10 million received from a former employer during a tax year will remain fully exempt from income tax. Any amount exceeding Rs10 million will be taxed at 5% on the excess.
The revised pension taxation framework is intended to provide greater financial relief to retired individuals while maintaining a modest tax on exceptionally high pension incomes.
Effective from July 1, 2026
The updated salary tax rates and pension provisions form part of the FBR’s revised Income Tax Ordinance, 2001, incorporating all amendments introduced through the Finance Act, 2026 up to June 30, 2026.
Salaried individuals, employers and payroll administrators are expected to implement the revised tax slabs for salary withholding and annual tax computation from July 1, 2026, in accordance with the provisions applicable to Tax Year 2027.