FBR removes the 9% surcharge on salaried individuals earning over Rs10 million from July 1, 2026, while the 10% rate remains for other taxpayers.
ISLAMABAD: The Federal Board of Revenue (FBR) has withdrawn the 9% surcharge on salaried individuals with effect from July 1, 2026, providing relief to employees whose taxable income exceeds Rs10 million.
The FBR explained the change in Circular No. 2 of 2026-27 (Income Tax), which outlines key amendments to the Income Tax Ordinance, 2001 introduced through the Finance Act, 2026.
Under Section 4AB, a surcharge was previously imposed on individuals and associations of persons whose taxable income exceeded Rs10 million.
The standard surcharge was set at 10% of the income tax imposed under Division I of Part I of the First Schedule. However, a separate 9% rate applied to persons whose income was chargeable under the head “Salary” once their taxable income crossed the Rs10 million threshold.
FBR removes surcharge on salaried individuals
Through the Finance Act, 2026, the FBR has withdrawn the 9% surcharge specifically applicable to salaried individuals.
As a result, salaried persons with taxable income exceeding Rs10 million will no longer be subject to the additional surcharge previously imposed under Section 4AB.
The amendment took effect from July 1, 2026, reducing the additional tax burden on high-income salaried employees.
10% surcharge remains for other taxpayers
The withdrawal does not extend to all taxpayers.
The 10% surcharge on other individuals and associations of persons whose taxable income exceeds Rs10 million will continue to apply.
The amendment therefore creates a distinction between salaried individuals and other taxpayers for the purpose of the surcharge under Section 4AB.
FBR clarifies tax relief under Finance Act 2026
The FBR’s clarification forms part of the broader tax changes introduced through the Finance Act, 2026 and explained in Circular No. 2 of 2026-27.
The removal of the 9% surcharge means qualifying salaried individuals will no longer face this additional levy on their income from the start of Tax Year 2027.