Finance minister presents Rs18.7 trillion federal budget 2026-27; here are the details

ISLAMABAD: Pakistan Finance Minister Muhammad Aurangzeb presented the budget for financial year 2026-27 with a total outlay Rs18.7 trillion in National Assembly on Friday.

The finance minister started his speech by paying tribute to armed forces of Pakistan who defeated a much larger enemy in May 2025 and the civil and military’s leadership’s efforts which took Pakistan to an elevated status in international diplomacy during the ongoing Iran war where both the US and Iran showed their trust in Pakistan’s mediation efforts.

He maintained the the closure of Strait of Hormuz and the subsequent rise in oil prices affected Pakistan’s economy like all other countries but the country’s government did not pass the burden directly to the people. Aurangzeb promised that the government will bring down petroleum products prices once the oil price drops in international market.

MAJOR POINTS FROM HIS SPEECH

• Total outlay 18.77 trillion rupees
• Remittances have seen a huge rise reaching 38billion dollar in 11 months.
• Recent months have seen rise in inflation but is expected to stay at 7.5 percent.
• International companies are investing in Pakistan. More than 200 international companies have invested in govt’s technology park.
• A number of DISCOs, Banks, Airports will soon be privatized on the same footing as PIA.
• Tax collection will reach 13000 billion by the end of this financial year, a huge jump from 7200 billion in 2022-23
• Digital Pakistan program has received huge success as more than 16 lac traders have joined digital payment systems. 133 million people have joined digital banking systems as compared to 95 million last year.

 

MAJOR ALLOCATIONS

1. Rs 000 billion allocated for Public Sector Development Programme (PSDP)
2. 54.6 billion for sustainable urban development
3. 103.1 billion for water availability projects.
4. 14 billion for Diamer Bhasha dam, 22 billion for Dasu dam, 15 billion for Dasu hydropwer and 10 billion for Karachi’s K-4 water project.
5. Rs 6.6 billion allocated for trade and industry.
6. Rs 25.1 billion allocated for health.
7. Rs46billion for higher education.
8. Rs22 billion allocated for Danish Schools Program.
9. Rs26.3billion for school and college education sector including early childhood training programme.
10. Rs144.9 billion allocated for AJK and Gilgit-Baltistan.
11. Rs 45 billion for AJK, 44 billion for GB, Rs56billion allocated for erstwhile FATA.
12. Withholding tax on international transactions on credit/debit card brought down to 0.5 percent from 5 percent.
13. Contraceptive tax brought down to zero.
14. Government employees’ salaries increased by 7%
15. Retired employees pensions Increased by 7%.
16. Minimum monthly wage increased by 10%
17. 3,000 billion Rupees for Defence
18. Rs128 billion provided for general and targeted petroleum subsidies to shield citizens from international oil price shocks.
19. Rs838 billion allocated for Benazir Income Support Program.
20. Rs365 billion allocated for Transport and Communication Infrastructure
21. N-25 Pakistan Expressway (Dualling Balochistan highway connecting Karachi to Chaman) gets 100 billion Rupees.
22. M-6 Motorway (Sukkur-Hyderabad Motorway) gets 30 billion Rupees.
23. ML-I (Karachi-Rohri Section) gets 25 billion rupees.
24. Thar Coal Connectivity Project gets 2 billion rupees.
25. Gwadar Port Infrastructure & Provincial Transport Projects get 93 billion rupees.
26. Rs 116.2 billion allocated for clean energy and hydro projects (Dasu, Tarbela 5th Extension, Mohand Hydro Project), modern grid systems like STATCOM (10.2 billion Rupees), battery storage (3 billion Rupees), and AJK/GB hydropower projects (13.1 billion Rupees).
27. Rs71billion allocated for PM “Apna Ghar” Scheme, the low-cost housing finance initiative.

TAX RELIEF FOR SALARIED CLASS

The government has proposed direct income tax relief for salaried individuals across four distinct income brackets (slabs). Additionally, the 10% tax surcharge on the salaried class has been completely abolished.

Here is the breakdown of the proposed salary tax slabs and the corresponding rate reductions:

Note on Surcharge: The finance minister highlighted that the surcharge on the salaried class was reduced from 10% to 9% in the previous budget, and this year it is proposed to be completely removed to fulfill the government’s promise of reducing the tax burden on employees.

FED on VEHICLES

The government has proposed the following measures regarding the Federal Excise Duty (FED) on vehicles and cars:

• Imported Cars and SUVs: FED is being imposed on imported cars as well as Sports Utility Vehicles (SUVs) with engine capacities ranging from 2000cc to 3000cc.

• High-Capacity Vehicles: For vehicles with engine capacities greater than 3000cc, the existing FED rates are being increased.

• Luxury Electric Vehicles (EVs): The application of this tax is also extended to luxury Electric Vehicles valued at more than 20 million Rupees (2 Crore).

Related Relief & Concessions for the Auto Sector

While duties are being increased on luxury and high-engine imports, the speech notes specific continuing concessions to support local modernization and eco-friendly transport:

• Electric Two-Wheelers and Three-Wheelers: The existing concessional tax regime for electric motorcycles and rickshaws will remain intact for the upcoming year.

• Commercial and Passenger Electric Vehicles: Current concessions will also continue to be maintained for locally assembled/produced electric cars and buses.

• Electric Trucks: A new relief measure has been proposed to provide a 1% Sales Tax facility on imported electric trucks

SUPER TAX

Here are the key decisions regarding the Super Tax:

1. Complete Abolishment for Mid-Tier Incomes

• Eligibility: Businesses with an annual income ranging between Rs. 150 million (15 Crore) to Rs. 500 million (50 Crore) across six distinct income slabs.

• Change: The Super Tax—which previously ranged from 1% to 7.5% depending on the slab—has been completely abolished.

2. Reduction for High-Tier Incomes

• Eligibility: Businesses with an annual income exceeding Rs. 500 million (50 Crore).

• Change: The Super Tax rate is proposed to be reduced from 10% to 8%.

Critical Exclusions (Tax Maintained)

This relief is intentionally targeted toward promoting general manufacturing, industries, and small-to-medium corporations. The finance minister explicitly stated that the existing tax/surcharge structures will remain fully intact and unchanged for the following high-earning sectors which include banks, oil and gas Exploration companies and fertilizer companies