Revised income tax slabs effective from July 1, 2026, include up to 45% tax rate and concession for eligible professional firms
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax rates applicable to business individuals and Associations of Persons (AOPs) for Tax Year 2027, effective from July 1, 2026, following the enactment of the Finance Act, 2026.
The FBR has released the updated Income Tax Ordinance, 2001, incorporating all amendments made up to June 30, 2026, including revised tax slabs for non-salaried individuals and AOPs.
Under the updated provisions, the prescribed rates will apply to every business individual and association of persons, except salaried individuals, based on their annual taxable income.
Revised tax slabs for business individuals and AOPs
The updated tax rates for Tax Year 2027 are as follows:
| Annual Taxable Income | Tax Payable |
| Up to Rs600,000 | Nil |
| Exceeds Rs600,000 but does not exceed Rs1,200,000 | 15% of the amount exceeding Rs600,000 |
| Exceeds Rs1,200,000 but does not exceed Rs1,600,000 | Rs90,000 + 20% of the amount exceeding Rs1,200,000 |
| Exceeds Rs1,600,000 but does not exceed Rs3,200,000 | Rs170,000 + 30% of the amount exceeding Rs1,600,000 |
| Exceeds Rs3,200,000 but does not exceed Rs5,600,000 | Rs650,000 + 40% of the amount exceeding Rs3,200,000 |
| Exceeds Rs5,600,000 | Rs1,610,000 + 45% of the amount exceeding Rs5,600,000 |
The revised tax structure maintains a progressive taxation system, with higher income brackets attracting higher marginal tax rates.
Relief for professional firms
The updated law also provides a concession for certain professional firms operating as Associations of Persons.
Under the amended provisions, where an AOP is a professional firm that is legally prohibited from incorporating under the laws or regulations governing its profession, the highest applicable tax rate will be 40% instead of 45%.
The concession is intended to benefit professional partnerships regulated by statutory professional bodies that do not permit incorporation, ensuring they are not subject to the highest marginal tax rate applicable to other business entities.
Effective from July 1, 2026
The notification forms part of the FBR’s updated Income Tax Ordinance, 2001, reflecting amendments introduced through the Finance Act, 2026, and provides clarity on the tax liabilities of business individuals and AOPs for the tax year commencing on July 1, 2026.
The FBR has advised taxpayers falling within these categories to review the revised tax slabs carefully to ensure accurate calculation of their income tax liability and timely compliance with return filing requirements for Tax Year 2027.