Federal Budget 2026–2027
Preparations for Pakistan’s Federal Budget 2026–2027 have entered the final stages, and the upcoming budget is expected to have significant effects on salaried individuals and retired government employees. According to recent reports and information from government sources, several important proposals are currently under discussion.
Budget Date and the Role of IMF
The government has decided to present the Federal Budget on 5 June 2026 in the National Assembly. The role of the International Monetary Fund (IMF) remains highly important in the budget-making process. An IMF delegation is expected to visit Pakistan on 16 May, while the institution continues to pressure the government to increase tax revenue and reduce subsidies.
Proposal to Tax Pensions
One of the most important and concerning developments relates to pensioners. The Federal Board of Revenue (FBR) is reportedly considering a proposal to bring pensions into the tax net. Initial reports suggest that retired employees receiving a monthly pension of Rs. 100,000 or more may face a tax ranging from 2% to 5%.
Expected Increase in Salaries and Pensions
For government employees struggling with rising inflation, proposals for salary and pension increases are also under consideration. Reports indicate that the government may approve an increase of 5% to 7% in salaries and pensions. However, employee unions and public circles argue that such an increase would be insufficient compared to the current inflation rate.
Some reports also suggest that instead of a major salary increase, the government may try to provide relief through tax reductions and adjustments in allowances.
Possible Changes in Income Tax Exemption Limit
Another positive proposal under discussion is an increase in the annual tax-free income threshold. The current exemption limit of Rs. 600,000 per year may be raised to between Rs. 1 million and Rs. 1.2 million annually. This step is aimed at providing relief to lower-income groups and improving their purchasing power.
Conclusion
The Federal Budget 2026–2027 is being prepared at a time when Pakistan is facing serious economic challenges. While the proposed tax on pensions has created concern among retired citizens, the possible increase in the tax-free income limit offers some hope for salaried individuals. Final decisions and official announcements are expected to be made on 5 June 2026 during the budget presentation in Parliament.
