Budget at a Glance

The government has framed the FY2026-27 budget around "stabilisation, reform and growth." It is the fourth budget presented by Aurangzeb as finance minister, and the first since Pakistan secured a longer runway on its IMF programme. Here are the headline numbers:

Metric FY2026-27 Target
Total budget outlay Rs 18.8 trillion
FBR tax revenue target Rs 15,264 billion (+17.6%)
Non-tax revenue Rs 5,336 billion
Net federal revenue (after provincial share) Rs 11,751 billion
Provincial transfer (NFC award) Rs 8,848 billion
Markup / debt servicing Rs 8,045 billion
Defence spending Rs 3,000 billion
GDP growth target 4%
Average inflation projection 8.2%
Fiscal deficit target 3.6% of GDP
Primary surplus target 2% of GDP

Where the Money Comes From

FBR has been handed a tax collection target of Rs 15,264 billion — 17.6% higher than last year's Rs 12,983 billion target — despite the outgoing fiscal year closing with an estimated Rs 1 trillion shortfall. On top of that, non-tax revenue (petroleum levy, SBP profits, dividends) is projected at Rs 5,336 billion, taking total federal revenue receipts to roughly Rs 20.6 trillion before the provincial share is carved out.

💡 Why the target looks aggressive: A 17.6% revenue growth target on top of a fiscal year that already missed its target by ~Rs 1 trillion is one of the more ambitious asks in recent budgets. Analysts widely read this as the number needed to satisfy IMF programme reviews rather than a number FBR is confident of hitting through normal collection growth alone.

Where the Money Goes

Current (non-development) federal expenditure is budgeted at Rs 17,495 billion — over 93% of the entire net federal budget — leaving a thin margin for new development spending. The biggest single line item isn't defence or development, it's debt:

Head Allocation
Markup / interest payments Rs 8,045 billion
Defence Rs 3,000 billion
Pensions Rs 1,169 billion
Civil administration Rs 1,071 billion
Subsidies Rs 1,091 billion
Federal PSDP (development) Rs 1,000 billion
BISP (Benazir Income Support Programme) Rs 838 billion (+17%)

Debt servicing alone (Rs 8,045bn) is more than five times the federal development budget — a structural problem that predates this budget and will likely persist until the debt stock itself stabilises.

Defence Spending: Rs 3 Trillion

Defence allocation rises to Rs 3 trillion, reflecting Pakistan's elevated security posture following last year's standoff with India. This is a politically sensitive line item that opposition lawmakers raised during the budget session, even as overall non-defence current spending stayed tight.

Relief for the Salaried Class

The most talked-about measure for ordinary taxpayers: the 9% surcharge on annual income above Rs 10 million has been abolished, and the salary tax schedule has been restructured from 6 to 8 brackets, with rate cuts concentrated in the Rs 2.2M–4.1M range. Government employee salaries rise 7% and the minimum wage rises 10%.

📊 Want the full slab table? We've broken down every bracket, worked examples, and exactly how much you save vs 2025-26 in a dedicated guide: FBR Income Tax Slabs 2026-27: New Salaried Tax Brackets Explained.

Super Tax: Phased Cuts, Not Full Abolition

The super tax on high earners and large companies — introduced in 2022 and a long-standing complaint of the business community — sees a partial rollback. The government proposed phasing it out entirely across the lower income slabs, while the top slab (income exceeding Rs 500 million annually) only sees its rate trimmed from 10% to 8%, not eliminated. Industry bodies had pushed for a full multi-year phase-out; the budget delivers a partial version of that ask.

IT and Export Sector Incentives

With IT exports hitting $4.5 billion this year (20%+ year-on-year growth), the budget doubles down on the sector: the 0.25% concessionary tax rate for IT exporters is extended, and the income tax exemption for the IT sector is pushed out to June 2029. Real estate and construction also got targeted tax incentives aimed at reviving activity in both sectors.

🧾 Freelancer or IT exporter? Use our Freelancer / IT Export Tax Calculator to see exactly how the concessionary rate applies to your income.

Social Protection and Infrastructure

Provinces: Bigger Transfer, Tighter Development Budgets

Under the NFC award, Rs 8,848 billion flows to the provinces from FBR's gross collections — a larger absolute transfer than last year, consistent with a bigger overall tax target. But reaching the combined fiscal consolidation numbers required negotiated cuts to the provinces' own development budgets: Rs 701 billion in Punjab, Rs 110 billion in Sindh, and Rs 109 billion in Khyber Pakhtunkhwa. In effect, provinces get more revenue but are spending less on their own development schemes — a trade-off tied to the IMF's overall deficit targets.

What This Means for You

Frequently Asked Questions

When was the FY2026-27 budget presented?

Finance Minister Muhammad Aurangzeb presented the budget in the National Assembly on 12 June 2026, amid protest from opposition lawmakers.

Is this budget bigger than last year's?

Yes. At Rs 18.8 trillion, it is larger in nominal terms than the 2025-26 budget, driven mainly by a higher FBR revenue target and rising debt servicing costs.

Does this budget reduce my income tax?

If you're salaried and earn between roughly Rs 2.2 million and Rs 7 million a year, yes — rates were cut in several brackets and the 9% surcharge above Rs 10 million was removed. Below Rs 2.2 million/year, the slabs are unchanged from 2025-26. See the detailed slab table for exact numbers.

Why is the FBR revenue target so much higher than last year?

The Rs 15,264 billion target represents 17.6% growth, set partly to compensate for an estimated Rs 1 trillion shortfall in 2025-26 and partly to meet commitments under Pakistan's IMF programme.

Was the super tax abolished?

Not fully. It was proposed to be phased out across the lower income slabs, but the top slab (income above Rs 500 million) only sees the rate cut from 10% to 8%.

Sources

Figures in this article are compiled from budget-day reporting by the following outlets. Government figures can be revised between the budget speech and the gazetted Finance Act, so cross-check against the FBR's official portal for the final notified numbers.

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