Statutory and legislative payroll changes in Pakistan, each linked to the page it was checked against. For information only, not legal or tax advice: confirm details with the source before acting. See the terms.
Surcharge on salary income abolished
Finance Act 2026
The Finance Act 2026 revised salaried tax slabs to reduce the burden, keeping the 35% top rate, and abolished the surcharge on salary income exceeding PKR 10 million.
For the employer
- Stop applying the surcharge when withholding tax on salary income above PKR 10 million.
For the employee
- The surcharge continues to apply to non-salaried individuals and AOPs.
Source: PwC Worldwide Tax Summaries - Pakistan, Individual, Significant developments · Last verified 1 October 2026
New salaried-individual tax slabs with 35% top rate from Rs 7 million
Effective 1 Jul 2026
The Finance Act 2026, enacted on 27 June 2026, reduced tax rates for salaried individuals in the First Schedule with effect from 1 July 2026. Income up to Rs 600,000 is untaxed, and the 35% rate now applies only to taxable income above Rs 7,000,000 (previously it applied from Rs 4,100,000).
For the employer
- Update salary withholding (section 149) to the new slabs: 1% over Rs 600,000; Rs 6,000 + 11% over Rs 1,200,000; Rs 116,000 + 20% over Rs 2,200,000; Rs 316,000 + 25% over Rs 3,200,000; Rs 541,000 + 29% over Rs 4,100,000; Rs 976,000 + 32% over Rs 5,600,000; Rs 1,424,000 + 35% over Rs 7,000,000.
For the employee
- Tax falls for salaries above Rs 2,200,000 a year; the surcharge no longer applies to income taxed under the salaried slabs.
In practice: Annual salary of Rs 4,100,000: tax is Rs 541,000 under the new slabs (Rs 616,000 under the previous rates).
The same slabs appear in the withholding rate card section of the KPMG brief (section 149, salary). KPMG states amendments are effective from 01 July 2026 unless otherwise provided.
Source: KPMG Taseer Hadi & Co. - A Brief of Finance Act, 2026 (July 2026) · Last verified 1 October 2026
Federal civil-servant Basic Pay Scales 2026 and 7% ad-hoc relief allowance
Effective 1 Jul 2026
This applies to federal government civil servants only and is not a private-sector payroll rule. By Office Memorandum dated 21 July 2026, the Ministry of Finance approved revised Basic Pay Scales and allowances effective 1 July 2026 for federal civil employees paid from civil and defence estimates. BPS-2026 replaces BPS-2022 and merges the earlier ad-hoc relief allowances; a new Ad-hoc Relief Allowance-2026 of 7% of running basic pay applies from 1 July 2026 until further orders.
For the employer
- Federal payroll units: fix pay in BPS-2026 point to point from the stage held on 30 June 2026.
- Stop the Ad-hoc Relief Allowances of 2022 (15%) and 2025 (10%), which cease on 1 July 2026, and pay the 7% allowance instead.
- Annual increment remains admissible on 1 December each year.
For the employee
- The Ad-hoc Relief Allowance-2026 is subject to income tax.
Applies to federal government civil employees, not to the private sector.
Source: Government of Pakistan Ministry of Finance - Office Memorandum, Revision of Basic Pay Scales and Allowances of Civil Servants 2026 · Last verified 1 October 2026