Updated 5 November 2026
The Finance Bill 2026 was enacted as the Finance Act 2026 after presidential assent on 25 June 2026. Most measures took effect on 1 July 2026, the start of Tax Year 2027. This summary covers the changes most relevant to our clients.
Salaried individuals
Tax rates were reduced in several salary brackets. Published summaries of the Act show the following slabs for Tax Year 2027:
| Annual taxable salary (Rs) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 1% of the amount over 600,000 |
| 1,200,001 – 2,200,000 | 6,000 + 11% of the amount over 1,200,000 |
| 2,200,001 – 3,200,000 | 116,000 + 20% of the amount over 2,200,000 |
| 3,200,001 – 4,100,000 | 316,000 + 25% of the amount over 3,200,000 |
| 4,100,001 – 5,600,000 | 541,000 + 29% of the amount over 4,100,000 |
| 5,600,001 – 7,000,000 | 976,000 + 32% of the amount over 5,600,000 |
| Over 7,000,000 | 1,424,000 + 35% of the amount over 7,000,000 |
The surcharge under section 4AB no longer applies to salary income. Employers should make sure payroll withholding reflects the revised rates.
New and revised withholding taxes
- Social media and digital content income: a new 5% withholding tax applies to income that content creators receive from platforms such as YouTube, Facebook and TikTok. It is a minimum tax for residents and a final tax for non-residents.
- Life insurance and takaful payouts: gains are taxed at 15% where the payout is within one year of issue, and 10% where it is after one year but before four years.
- Bank reporting: banks and electronic money institutions must automatically report transaction data for accounts with aggregate deposits or withdrawals above Rs 100 million.
Sales tax and federal excise duty
- More goods, including confectionery, sauces, and household plastic and ceramic products, are now taxed on retail price.
- The reduced 1% rate on locally assembled electric vehicles was extended.
- Penalties for sales tax non-compliance were increased substantially.
- A new federal excise duty applies to imported electric cars and SUVs valued above USD 75,000, while the duty on club, business and first-class air tickets was reduced.
Customs
- A 0% customs duty applies to a wide range of active pharmaceutical ingredients.
- Duty on construction vehicles such as dumpers and transit mixers was reduced from 20% to 10%.
What to do next
Review payroll settings, withholding obligations and pricing for goods newly taxed at retail price, and consider the effect on your Tax Year 2027 planning. Contact our tax team for an assessment of how the changes affect your business.
Sources
- KPMG TaxNewsFlash, July 2026: Pakistan tax and customs measures in Finance Act 2026
- Vialto Partners: Pakistan employment tax, Finance Bill/Act 2026 summary
- Federal Board of Revenue: Finance Act 2026
This article is a general summary as at the date shown and is not tax advice. Rates and conditions should be confirmed against the Finance Act 2026 and the relevant Ordinance before acting.