Budget 2026–27: what's changed
The key amendments made by the Finance Act 2026 to income tax, sales tax and federal excise, plus the Sindh Finance Act 2026, and what they mean for you.
Lower tax on salaries from Tax Year 2027
Slabs from Rs 2.2 million upwards have been cut, the top 35% rate now starts at Rs 7 million instead of Rs 4.1 million, and the 9% surcharge on salaried people has been withdrawn.
| Monthly salary | Tax Year 2026 | Tax Year 2027 | You save |
|---|---|---|---|
| Rs 150,000 | Rs 72,000 | Rs 72,000 | No change |
| Rs 400,000 | Rs 861,000 | Rs 744,000 | Rs 117,000 a year |
| Rs 1,000,000 | Rs 3,685,290 | Rs 3,174,000 | Rs 511,290 a year |
New salaried slabs
| Annual taxable salary | Tax |
|---|---|
| Up to Rs 600,000 | Nil |
| Rs 600,001 – 1,200,000 | 1% above Rs 600,000 |
| Rs 1,200,001 – 2,200,000 | Rs 6,000 + 11% above Rs 1.2M |
| Rs 2,200,001 – 3,200,000 | Rs 116,000 + 20% above Rs 2.2M |
| Rs 3,200,001 – 4,100,000 | Rs 316,000 + 25% above Rs 3.2M |
| Rs 4,100,001 – 5,600,000 | Rs 541,000 + 29% above Rs 4.1M |
| Rs 5,600,001 – 7,000,000 | Rs 976,000 + 32% above Rs 5.6M |
| Above Rs 7,000,000 | Rs 1,424,000 + 35% above Rs 7M |
Property & individuals
Property advance tax simplified
Seller: flat 2.75% of gross consideration (s.236C). Buyer: flat 1.25% of fair market value (s.236K). Higher late-filer rates abolished.
Inherited property
Cost of inherited immovable property is its fair market value on transfer, and family settlements after a death count as transmission.
Deemed income tax abolished
Tax on deemed income from property under section 7E has been omitted.
Foreign card payments
Advance tax on international credit, debit and prepaid card payments cut from 5% to 0.5%.
Life insurance payouts
Payouts within 1 year taxed at 15% and within 4 years at 10% (gain over premiums). Not on death, disability or after 4 years.
Non-ATL persons
Surcharge to rejoin the Active Taxpayers' List increased, with a new undertaking option for individuals not buying property for six months.
Businesses & companies
Super tax relief
Abolished up to Rs 500 million for most persons; 8% above Rs 500 million. Banks, Fifth Schedule and fertilizer income above Rs 150 million: 10%. Exporters with 80%+ export turnover exempt.
Withholding on services
A key services rate under section 153 raised from 6% to 7%; independent professionals (doctors, lawyers, accountants, software developers) 15%; port and terminal services 12%; other services 14%.
Exporters & IT exporters
Export tax fixed at 1.25% as minimum tax and the extra 1% advance tax abolished. IT export rate of 0.25% extended to Tax Year 2029.
Distributors & wholesalers
Minimum tax under section 113 reduced to 0.5% for specified distributors, dealers and wholesalers on the ATL.
Limited liability partnerships
LLPs are now treated as an association of persons (AOP).
Machine-readable accounts
From Tax Year 2026, companies' financial statements must be filed in an electronically readable format, not as scans or images.
Digital economy & integration
Social media income
Banks deduct 5% on revenue received from social media platforms by content creators and influencers.
E-commerce regime
Tax becomes adjustable for turnover above Rs 200 million; smaller businesses may opt for the normal regime from Tax Year 2027.
Integration with FBR
Non-integrated businesses lose 3% of claimed expenses. A 10% tax credit is available on investment in the required electronic systems.
Integration penalties
Failure to install or use required electronic systems: 1% of turnover or Rs 1 million, whichever is higher, then Rs 2 million per quarter.
Audits, notices & disputes
Faceless audits & appeals
Selected audits, assessments and appeals run through the National Faceless Centre, with online hearings.
Algorithmic settlement
Accept a system-calculated settlement within 10 days on IRIS to close a notice or audit issue, with no separate penalty.
Bank data matching
Banks upload data for accounts with deposits or withdrawals above Rs 100 million for automated cross-matching with tax returns.
Re-audit powers
The Commissioner can direct a re-audit by an accountant, stock re-valuation or actuarial valuation from an FBR panel.
Tougher penalties
Penalties enhanced, including a new penalty equal to any withholding credit claimed but not actually deposited.
Case scrutiny committee
The FBR can only take a case to the High Court or Supreme Court after approval by an independent committee.
Federal sales tax & FED
Tier-1 retailers
Now mainly based on turnover above Rs 200 million. Accepting card payments alone no longer makes a retailer Tier-1.
Invoices for exempt supplies
Invoices with a verifiable FBR invoice number are required for exempt supplies and advance receipts too.
Fake invoices
Penalty equal to the invoice value, plus listing on a public 'Simulated Invoice Issuers Register'. Buyers' input tax on such invoices is reversed.
Unmatched input tax
20% penalty on input tax that can't be matched to the supplier's declared output tax, plus reversal and default surcharge.
More withholding agents
AOPs and individuals now withhold sales tax like companies, and toll manufacturers must withhold on conversion charges.
FED changes
Air tickets (club, business, first) rationalised to fixed amounts; FED on luxury electric vehicles of 30–40%; e-liquids Rs 16,500 per kg.
Sindh (SRB) services
8% reduced rate
Legal, tax consultancy and preparation, insolvency, repair, beauty and physical well-being, ready-mix concrete and dredging services.
Property developers
Fixed rates: Rs 100 per square yard of land and Rs 50 per square foot of covered area.
Insurance intermediaries
Insurance agents 2%; insurance brokers 3%.
Education
Fees up to Rs 500,000 a year per student exempt; above that 3%; educational support services 5%.
De-registration & software
De-registration period extended to 180 days; penalty of up to Rs 1 million for non-compliant invoicing software.
Agricultural income (Sindh)
Super tax on agricultural income: nil up to Rs 500 million, 8% above.
This is a general summary of the Finance Act 2026, the FBR's explanatory circulars (Income Tax Circular No. 02 of 2026-27 and Sales Tax & FED Circular No. 01 of 2026) and the Sindh Finance Act 2026. It isn't advice on your specific case. Please speak to us before acting on it.
How much less tax will I pay on my salary in Tax Year 2027?
Salaried slabs were cut by the Finance Act 2026 and the 9% surcharge on salaried people was withdrawn. For example, on Rs 400,000 a month the annual tax falls from about Rs 861,000 to Rs 744,000, and on Rs 1,000,000 a month from about Rs 3,685,000 to Rs 3,174,000. Use our calculator for your own figure.
Is there still a surcharge on salary income?
No. From Tax Year 2027 the 9% surcharge on salaried individuals has been withdrawn. The 10% surcharge still applies to other individuals and AOPs with taxable income above Rs 10 million.
What advance tax applies when buying or selling property now?
The seller pays a flat 2.75% of the gross sale value under section 236C, and the buyer pays a flat 1.25% of the fair market value under section 236K, replacing the earlier slab rates. The higher rates for people who filed their return late have been abolished.
What is the new 'faceless' audit and assessment?
The FBR has set up a National Faceless Centre. For selected cases, audits, assessments and appeals are handled electronically by officers whose identity is kept confidential, with hearings held online (E-hearing).
What is the algorithmic settlement mechanism?
For certain notices and audits, the FBR's system can offer a settlement amount. If you accept it on IRIS within ten days, pay it and revise your return, the issues in that notice are closed, with no separate penalty or default surcharge.
Am I now a Tier-1 retailer for sales tax?
Retailers are now Tier-1 mainly where turnover, declared or worked back from withholding tax, is more than Rs 200 million. Merely accepting card payments no longer makes a small retailer Tier-1.
Do I have to issue invoices for exempt supplies too?
Yes. Registered persons must now issue invoices for exempt supplies and advance receipts as well, each with a unique, verifiable FBR invoice number.
What rate of SRB sales tax applies to legal and tax consultancy services in Sindh?
The Sindh Finance Act 2026 sets a reduced rate of 8% for legal services, tax consultancy and preparation services, and insolvency services.
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