Pakistan’s federal budget for fiscal year 2026-27 has been approved without opposition, paving the way for a wide range of tax reforms, development initiatives, social welfare measures, and economic policy changes that will take effect from July 1, 2026.
The government has set an ambitious GDP growth target of 4 percent for the upcoming fiscal year, while inflation is projected to average 8.2 percent. To support public spending, the Federal Board of Revenue (FBR) has been assigned a revenue target of Rs. 15.264 trillion, representing a substantial increase from the previous year.
Total federal expenditure has been fixed at Rs. 18.771 trillion, with debt servicing remaining the largest component of spending. Meanwhile, the defence budget has been increased to Rs. 3 trillion, reflecting the government’s strategic priorities.
One of the most notable aspects of the budget is the relief provided to salaried individuals and businesses. Income tax rates for the salaried class have been reduced across multiple slabs, while the proposed surcharge on salaried taxpayers has been removed. Businesses have also received tax relief through adjustments to super tax and revisions to several business taxation measures.
The property sector has been given a significant boost through lower withholding taxes on property purchases and sales. Additionally, the controversial deemed income tax under Section 7E has been abolished, a move welcomed by real estate stakeholders.
Export-oriented industries and the IT sector have also benefited from the approved measures. The Final Tax Regime for IT exporters has been extended until June 2029, while exporters will see their tax burden reduced through lower minimum tax rates.
In a major convenience measure for overseas Pakistanis and frequent travelers, withholding tax on foreign credit and debit card transactions has been reduced from 5 percent to 0.5 percent. The Capital Value Tax on financial assets is also set to be abolished.
Social welfare spending has received a substantial allocation. The Benazir Income Support Programme (BISP) budget has been increased to Rs. 838 billion, with plans to support 12 million families and provide educational stipends to more than 9 million children.
The government has also allocated Rs. 71 billion for the Prime Minister’s Apna Ghar Scheme, aimed at improving access to housing finance. Additional funding has been earmarked for health, higher education, vocational training, skills development, and climate-resilient housing projects.
Infrastructure development remains a key focus area. Significant funding has been allocated for roads, railways, water projects, energy infrastructure, and urban development schemes. Major projects include the M-6 Motorway, ML-1 railway upgrades, Thar connectivity initiatives, and water projects such as Diamer-Bhasha Dam, Mohmand Dam, and Karachi’s K-IV water supply scheme.
The budget also introduces reforms to support Pakistan’s transition toward a digital economy. Measures include expanded digital payment systems, development of digital public infrastructure, implementation of artificial intelligence policies, and strengthening of the National Data Exchange Layer.
A major change for consumers is the introduction of an installment payment facility for PTA and DIRBS taxes on imported mobile phones. While tax rates on imported devices remain unchanged, users will now be able to pay the applicable taxes in installments, provided all payments are completed within the same financial year.
The automotive sector has also seen important revisions. The government continues to support electric vehicles through incentives for electric motorcycles, rickshaws, buses, and cars. However, higher Federal Excise Duty rates have been imposed on luxury vehicles and expensive imported electric vehicles.
Government employees and pensioners have also received relief, with salaries and pensions set to increase by 7 percent. The minimum wage has been raised by 10 percent, providing additional support to lower-income workers.
With a mix of tax relief, infrastructure investment, social welfare expansion, and digital economy reforms, the FY2026-27 budget aims to stimulate economic growth, encourage investment, and improve living standards while maintaining fiscal discipline.
