Chartered accountants’ body proposes CPI-based adjustment of salary tax slabs to ease burden on salaried class amid persistent inflation.
The Institute of Chartered Accountants of Pakistan has proposed linking salary tax slabs with Consumer Price Index (CPI) inflation in the federal budget 2026-27 to reduce the growing tax burden on salaried individuals.
In its budget recommendations, ICAP said tax rates and thresholds for salaried persons have remained unchanged for the past six years despite sharp increases in inflation and living costs.
The institute noted that the minimum taxable salary threshold remains fixed at Rs600,000 per annum, which it said no longer reflects current economic realities. Persistent inflation has pushed many low and middle-income earners into the tax net even as their real purchasing power has weakened.
According to ICAP, expenses related to housing, transportation, utilities and education have increased significantly in recent years, placing additional financial pressure on fixed-income households.
The institute also highlighted that salaried tax slabs have tightened considerably over the past two years. It said the top tax slab threshold, which previously applied to annual income above Rs7 million, has been reduced to Rs4.1 million, increasing the tax burden on middle and upper-middle income earners.
As part of its proposals, ICAP recommended increasing the minimum taxable threshold for salaried individuals to Rs1.2 million annually from the current Rs600,000.
The institute also called for a comprehensive review of existing salary tax slabs to provide relief to low and middle-income groups.
ICAP emphasized the need for automatic annual indexation of salary tax brackets based on CPI inflation, allowing tax thresholds to adjust in line with rising prices.
According to the institute, such a mechanism would prevent salaried individuals from moving into higher tax brackets solely because of inflation-driven salary increases rather than real income growth.
ICAP said inflation-linked tax adjustments would improve fairness, transparency and predictability in the taxation system while protecting taxpayers’ real disposable income.
The institute added that rationalizing salary taxation could also encourage voluntary tax compliance and support consumption capacity in the formally employed sector.
