Budget 2026-27: Tax relief on cards for those earning up to Rs2.2m/year

ISLAMABAD – The federal government is considering several proposals for salary increases and tax relief for salaried class in the upcoming federal budget for the next fiscal year. The proposals include reducing taxes for salaried individuals earning between Rs1.2 million and Rs2.2 million annually. The government is also reviewing a possible salary increase of up to 10 percent for public sector employees. The proposals further suggest increasing conveyance allowance by 100 percent for employees in grades 1 to 19, while employees in grades 20 to 22 may receive an increase ranging from 50 to 75 percent. Officials are also considering merging one of the four existing ad hoc relief allowances into the basic salary structure. Currently, government employees continue to receive ad hoc allowances introduced in 2022, 2023, 2024, and 2025 without integration into basic pay. Additional proposals include a disparity allowance for employees in grades 1 to 16 and the inclusion of armed forces personnel in a contributory pension scheme. Reports said said the final decision regarding salary increases and allowances will be made during a federal cabinet meeting before the budget announcement. The proposals are also reportedly being discussed with the International Monetary Fund during virtual negotiations. Officials added that rising fuel prices and regional tensions have made an increase in conveyance allowance a key government priority.