Salaried Class Tops Pakistan’s Income Tax Contributors

Pakistan’s salaried workforce continued to rank among the country’s largest taxpayers during FY2025-26, contributing approximately Rs633 billion in income tax to the national exchequer. According to provisional Federal Board of Revenue (FBR) figures, the salaried class paid substantially more income tax than exporters, retailers, and several key withholding tax categories relating to real estate transactions.

The FBR provisionally collected Rs13.010 trillion in total tax revenue for the fiscal year ending June 30, 2026. Income tax deducted from salaries reached approximately Rs633 billion, compared with Rs585 billion in FY2024-25 after incorporating book adjustments.

Officials, however, noted that preliminary reconciled estimates place the salaried class’ contribution at around Rs630 billion, with the final figure expected to be confirmed after completion of June reconciliations.

By comparison, income tax collected from exporters amounted to Rs174 billion during FY2025-26, marginally lower than the Rs176 billion collected in the preceding fiscal year.

In the real estate sector, withholding tax collections under Sections 236C and 236K of the Income Tax Ordinance, 2001 showed mixed trends. Tax collected from property sellers under Section 236C increased significantly to Rs191 billion, compared with Rs118 billion a year earlier.

Conversely, withholding tax collected from property buyers under Section 236K declined to Rs87 billion from Rs120 billion in FY2024-25. Combined collections under both provisions totalled Rs278 billion during the fiscal year.

Retailers contributed approximately Rs70 billion through withholding taxes under Sections 236G and 236H, up from Rs62 billion in the previous year. Collections under Section 236G increased to Rs25 billion, while receipts under Section 236H rose to Rs45 billion, reflecting improved tax collection from the retail sector.

According to reports, the Accountant General of Pakistan Revenue (AGPR) is finalising book adjustments relating to income tax deductions from federal government employees and certain payments made by the armed forces. Reconciled adjustments amounted to Rs40 billion during July–May FY2025-26 and are expected to reach approximately Rs47 billion upon completion.

For FY2026-27, the government has established an ambitious FBR revenue target of Rs15.264 trillion.

During a briefing to the National Assembly Standing Committee on Finance, Finance Secretary Imdadullah Bosal stated that the latest federal budget provides approximately Rs52 billion in tax relief for the salaried class.

Under the revised tax structure, individuals earning up to Rs267,000 per month will now be subject to a 20% income tax rate, reflecting a 3% reduction. Taxpayers earning up to Rs341,000 per month will be taxed at 25%, benefiting nearly 160,000 taxpayers within that income bracket.

The budget further prescribes a 29% tax rate for monthly income up to Rs467,000, a 32% rate for monthly income up to Rs583,000, and a 35% rate for individuals earning above Rs583,000 per month, equivalent to more than Rs7 million annually.

Additionally, the threshold for the highest 35% income tax slab has been increased from Rs4.1 million to Rs7 million per annum, reducing the annual tax liability of eligible taxpayers by up to Rs257,000.

The government has also announced substantial tax relief for the real estate sector, estimating the overall benefit at Rs115 billion. Under the revised regime, the three existing withholding tax slabs applicable to property sales have been consolidated into a single rate of 2.75%, replacing the previous maximum rate of 5.5%.

Similarly, the withholding tax on property purchases has been reduced from 2.5% to 1.25%, marking the second consecutive annual reduction in transaction taxes applicable to purchasers. During FY2025-26, collections under Section 236K declined by 27%, falling to Rs87 billion from Rs119 billion recorded in the preceding year.

The budget also introduces an optional fixed income tax regime for retailers. Eligible businesses may elect to pay 1% of annual sales as income tax, while receiving exemption from mandatory digital integration requirements and routine audit provisions.

Retailers opting into the scheme will also retain the flexibility to exit the regime after completing one year under the fixed taxation framework.