The federal government is expected to unveil a budget exceeding Rs17.5 trillion for fiscal year 2026-27, with proposals aimed at increasing revenue, providing relief to salaried individuals and promoting economic growth.
According to budget proposals, the government has set a tax revenue target of Rs15.267 trillion and plans to generate around Rs1 trillion in additional revenue measures. New taxes worth Rs220 billion have also been proposed.
Relief Expected for Salaried Class
The government is expected to approve an increase in salaries and pensions as part of the new budget.
Authorities are considering providing up to Rs50 billion in tax relief to salaried individuals. A proposal is also under consideration to increase the number of income tax slabs from six to eight.
People earning more than Rs183,000 per month are likely to receive relief under the revised tax structure.
The government is also considering reducing the tax rate for one income bracket from 25 percent to 20 percent.
Meanwhile, new tax rates of 29 percent and 32 percent have been proposed for monthly incomes ranging between Rs467,000 and Rs583,000. The maximum tax rate of 35 percent is expected to remain unchanged for individuals earning more than Rs583,000 per month.
Officials are also considering abolishing the surcharge currently imposed on annual incomes exceeding Rs100 million.
New Measures for Electric Vehicles
The budget proposals include changes for the automobile sector.
Sales tax on imported electric vehicles may increase to 25 percent, while the existing taxation regime for hybrid vehicles is likely to remain unchanged.
The government is also considering imposing a carbon levy on conventional vehicles.
At the same time, incentives have been proposed to promote local electric vehicle manufacturing. Customs duty and sales tax on motors and batteries may be reduced to 1 percent, while exemptions from other taxes, including the Federal Excise Duty and Capital Value Tax, are also under consideration.
Petroleum Levy Target Set at Rs1.7 Trillion
The government plans to collect Rs1.727 trillion through the petroleum levy during the next fiscal year.
Budget proposals also include imposing a Federal Excise Duty on naphtha and some other petroleum products to increase revenues.
Growth Targets and Employment Plans
The government has set a GDP growth target of:
3.8 percent for agriculture
4 percent for industry
4.5 percent for large-scale manufacturing
4.2 percent for the services sector
Authorities are aiming to create two million jobs during FY2026-27.
The target includes:
- 500,000 jobs in the industrial sector.
- 400,000 jobs in agriculture.
- 1.1 million jobs in the services sector.
However, the trade deficit is projected to remain above $37 billion.
Exports are expected to reach $32.8 billion, while imports are estimated at $70 billion.
Development Spending to Reach Rs3.669 Trillion
The national development plan is expected to amount to Rs3.669 trillion.
The federal Public Sector Development Programme (PSDP) is proposed at Rs1 trillion, while provincial development programmes are expected to total Rs2.218 trillion.
Budget proposals indicate reductions in development spending for Punjab, Sindh and Khyber Pakhtunkhwa.
The government has also decided to limit new projects, with priority likely to be given to defence and internal security requirements.
Debt Servicing and Defence Spending
Debt servicing is expected to remain the largest expenditure item in the upcoming budget.
The government has allocated approximately Rs7.824 trillion for interest payments on loans.
Meanwhile, the defence budget is expected to stand at around Rs3 trillion.
Tax Reforms Under Consideration
The government is considering bringing cryptocurrency trading into the tax net.
Proposals also include imposing capital gains tax ranging from 10 percent to 30 percent.
A reduction of 1 to 2 percent in the super tax is also under consideration.
Officials are reviewing the possibility of ending tax exemptions available to the former tribal districts.
In addition, sales tax on some food items, including ghee, cooking oil and milk, may increase.
The government is also planning stricter penalties for businesses that fail to install point-of-sale (POS) systems.
Solar Panel Tax Proposal Withdrawn
Authorities have decided not to increase taxes on solar panels and stationery items.
Officials have also opted against making major changes to taxation on the stock market.
The Federal Budget 2026-27 is expected to be formally presented later today.