Finance Minister Muhammad Aurangzeb presented the federal budget for fiscal year 2026-27 in the National Assembly during a session chaired by Speaker Ayaz Sadiq, as opposition members protested and created noise in the House.
The National Assembly budget session was chaired by Speaker Ayaz Sadiq.
Prime Minister Shehbaz Sharif reached the Assembly session, while Bilawal Bhutto Zardari also attended the proceedings. Earlier, Bilawal Bhutto and Mohsin Naqvi left for the National Assembly Hall.
Finance Minister Muhammad Aurangzeb formally presented the budget document for the new fiscal year 2026-27.
During his speech, the finance minister said Pakistan had gained such importance that its voice was now being heard. He also said that in May last year, Pakistan gave a befitting reply to India. Aurangzeb referenced Operation Bunyanun Marsoos during his budget speech and paid tribute to the services and sacrifices of Pakistan’s armed forces.
"It is an honour for me to present the budget before this House," the finance minister said, while thanking the parliamentary leaders of all political parties for their cooperation.
He stated that today the entire world recognizes Pakistan’s defence capabilities and noted that several countries have expressed interest in acquiring Pakistani fighter jets for their armed forces.
Aurangzeb also highlighted the defence cooperation agreement between Pakistan and Saudi Arabia, saying it has provided a strong new foundation for bilateral relations. He added that Pakistan’s defence industry has emerged as a valuable source of foreign exchange earnings.
The minister said the armed forces gave a befitting response to the enemy and described the success of Operation Bunyanun Marsoos as a bright chapter in Pakistan’s history and an important milestone for the future. He stressed that a strong defence is essential for safeguarding the country's sovereignty and integrity.
During the speech, opposition members raised slogans and displayed banners and placards in the House.
Aurangzeb said both the United States and Iran have placed their trust in Pakistan, adding that the improvement in Pakistan’s international standing is the result of efforts by the country's civil and military leadership, to whom he expressed gratitude.
He said Pakistan played a responsible role in promoting peace in the region, with China supporting these efforts. According to the finance minister, Pakistan is working to ensure the success of diplomatic initiatives, while oil supplies through the Strait of Hormuz have been restored.
He added that Islamabad successfully helped bring the United States and Iran to the negotiating table through diplomatic engagement.
The finance minister thanked Prime Minister Shehbaz Sharif and PPP Chairman Bilawal Bhutto Zardari for their cooperation during the budget preparation process.
Economic performance and relief measures
Aurangzeb said Pakistan’s economic growth rate has reached 3.7% and credited the government’s economic management under Prime Minister Shehbaz Sharif for overcoming significant challenges.
He noted that the benefits of declining global oil prices are being passed on to the public. Despite the recent regional crisis, Pakistan faced no shortages of petroleum products, he said.
The government provided tax relief worth Rs128 billion through petroleum prices, according to the finance minister. He added that the government has absorbed the burden of price fluctuations to protect consumers.
He also pointed out that the US-Iran conflict had pushed petroleum prices higher in international markets.
Pakistan-China Relations
The finance minister said the prime minister’s recent visit to China gave fresh momentum to bilateral relations.
He emphasized that Pakistan-China ties extend beyond government-to-government relations, describing China as Pakistan’s most important trading partner and a key pillar of the country’s foreign policy.
Tax relief for salaried class
The government announced significant tax relief for salaried individuals.
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The tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually has been reduced from 23% to 20%.
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The tax rate for those earning between Rs3.2 million and Rs4.1 million annually has been reduced from 30% to 25%.
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The tax rate for individuals earning between Rs5.6 million and Rs7 million annually has been reduced from 35% to 32%.
The government has also decided to abolish the income surcharge imposed on the salaried class.
Super tax and property sector relief
The government announced the complete abolition of super tax across six income slabs.
Previously, individuals earning between Rs150 million and Rs500 million annually were subject to a super tax ranging from 1% to 7%. For incomes exceeding Rs500 million annually, the super tax rate has been reduced from 10% to 8%.
In addition, the government has reduced income tax and withholding tax on property transfers and announced incentives for the construction sector to encourage investment and growth.
Key tax telief and economic measures
The finance minister announced the abolition of taxes on essential women's healthcare products as part of the government's relief measures in Budget 2026-27.
Foreign assets and international transactions
The government has abolished the Capital Value Tax (CVT) on foreign assets.
In addition, withholding tax on international transactions made through debit and credit cards has been significantly reduced. The tax rate on such transactions has been cut from 5% to 0.5%.
The finance minister said the new measures are aimed at encouraging Pakistanis to declare and bring their foreign financial assets into the formal economy.
Support for IT, export sectors
To promote the growth of Pakistan's IT industry, the government has extended the concessionary tax rate of 0.25% on IT export earnings for another three years.
According to the budget speech, this relief will remain in place until June 30, 2029, and is expected to boost IT exports and strengthen the country's digital economy. The government also announced additional relief measures for the export sector in the new budget.
Incentives for construction, allied industries
The finance minister said that around 40 industries linked to the construction sector, including cement, iron and steel, glass, timber, paints, tiles, and hardware, are expected to benefit from the new measures.
The government believes these incentives will stimulate construction activity, generate economic growth, and create employment opportunities across the country.
Property tax relief for filers
The government has announced a significant reduction in property transaction taxes for tax filers.
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The tax rate on the sale of property for filers has been reduced from 5.5% to 2.75%.
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The tax rate on the purchase of property for filers has been reduced from 2.5% to 1.25%.
These measures are intended to encourage investment in the real estate sector and promote documented economic activity.
Fixed tax scheme for small traders
Finance Minister Aurangzeb announced a fixed tax scheme for small shopkeepers and traders aimed at simplifying tax compliance and encouraging documentation of the economy.
Under the scheme, FBR officials will not be allowed to enter shops for questioning or inspections related to the scheme.
A verification QR code will be displayed on the shop's plaque, while eligible traders will be issued a special green plaque as proof of participation.
Key Features of Scheme
- Small traders will be exempt from installing Point of Sale (POS) machines.
- Traders covered under the scheme will not be treated as withholding agents.
- Beneficiaries of the scheme will not be subject to tax audits.
- A minimum fee of Rs25,000 must be deposited when filing the annual tax return.
- The business community will be allowed to adjust withholding tax payments against their tax liability.
- Eligible traders will pay a fixed tax of 1% of their annual sales.
- The scheme will apply to traders with an annual turnover of up to Rs200 million
Tax administration and digital reforms
The government has decided to expand the scope of the Third Schedule of Sales Tax and broaden the scope of purchases from unregistered persons. A National Faceless Centre and Assessment System has also been introduced.
Under the new system, there will be no direct contact between taxpayers and tax officers, helping improve transparency and reduce discretionary interactions.
The scope of production monitoring and digital invoicing has also been expanded to strengthen tax compliance and documentation.
New excise duties and vehicle taxes
The budget imposes a Federal Excise Duty of Rs80 per litre on white spirit and mineral turpentine oil.
According to the budget speech, these products are commonly used for fuel adulteration. The tax has been imposed to protect millions of consumers from damage to their vehicles and machinery.
The government has also introduced new taxes on imported SUVs with engine capacities above 2,000cc and up to 3,000cc. In addition, duties on vehicles with engine capacities exceeding 3,000cc will be increased.
Luxury electric vehicles valued above Rs20 million will also be subject to taxation under the new budget proposals.
Relief for salaried employees, pensioners
The finance minister acknowledged that inflation has increased financial pressures on salaried individuals.
To provide relief:
- Salaries of government employees are proposed to be increased by 7%.
- Pensions are also proposed to be increased by 7%.
- The minimum monthly wage is proposed to be increased by 10%.
These measures are intended to help workers and pensioners cope with rising living costs while supporting household incomes.
Relief for travel, EVs, medicines, industry
Aurangzeb announced several tax relief measures and policy initiatives aimed at promoting electric vehicles, supporting the pharmaceutical sector, reducing industrial costs, and encouraging economic growth.
FED on business-class travel
The government has abolished the Federal Excise Duty (FED) on international travel in business class, providing relief to travelers and the aviation sector.
New auto sector policy
The government has decided to present a new auto sector policy in Parliament shortly after cabinet approval.
The policy is expected to outline the future direction of Pakistan's automobile industry, with a particular focus on electric vehicles and sustainable transportation.
Incentives for electric vehicles
The government has decided to maintain the concessional tax regime for:
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Electric motorcycles
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Electric rickshaws
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Electric cars
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Electric buses
In addition, a proposal has been made to offer a reduced sales tax rate of 1% on imported electric trucks.
However, the finance minister clarified that luxury electric vehicles will not be eligible for these concessions and incentives.
Relief for pharmaceutical industry
The government has decided to abolish taxes imposed on the local production of medicines used to treat cancer and other serious diseases.
The measure is intended to support domestic pharmaceutical manufacturers and improve the affordability of essential medicines for patients.
Customs Duty abolished on raw materials
To reduce production costs and support industrial growth, the government has decided to completely eliminate customs duty on more than 100 categories of raw materials.
The initiative is expected to lower manufacturing costs, improve competitiveness, and encourage investment across various sectors of the economy.
Opposition protests during proceedings
Opposition members staged a protest inside the House during the budget presentation. The session witnessed noise and commotion as the finance minister presented the federal budget proposals.
Opposition chanted slogans against inflation and rejected the "anti-people budget". It also sought 'Awam ko relief do'.
Federal budget size fixed at Rs18.77tr
According to the budget document, the size of the federal budget for the upcoming fiscal year has been set at Rs18,771 billion. The Federal Board of Revenue’s annual tax target has been fixed at Rs15,264 billion.
Gross revenue has been estimated at Rs20,600 billion, while non-tax revenue is projected at Rs5,336 billion.
Also Read: Cabinet approves budget, proposes 7% hike in salaries, pensions
The budget document shows that Rs8,848 billion will be transferred to the provinces in the next fiscal year. After provincial transfers, the federal government’s net revenue is estimated at Rs11,751 billion.
The government plans to borrow Rs2,034 billion from internal sources and Rs813 billion from external sources. It will also obtain Rs4,012 billion through T-bills, Pakistan Investment Bonds and Sukuk.
In addition, Rs161 billion is expected to be generated through the privatization of government institutions during the next fiscal year.
FBR revenue targets
According to the budget documents, the FBR has been assigned a tax collection target of Rs15,264 billion for the fiscal year 2026-27.
The revenue targets have been divided as follows:
- Income Tax Target: Rs7,613 billion
- Indirect Taxes Target: Rs7,651 billion
- Customs Duty Target: Rs1,651 billion
- Sales Tax Target: Rs4,972 billion
- Federal Excise Duty (FED) Target: Rs1,073 billion
Key fiscal targets
According to the budget documents, the revised revenue estimate for the current fiscal year stands at Rs12,983 billion, while the government has set a 17.6% revenue growth target for the next fiscal year.
Key fiscal and economic targets for 2026-27 include:
- Non-tax revenue is projected to increase to Rs5,336 billion.
- Total national revenue is targeted at Rs20,600 billion.
- Rs8,848 billion will be transferred to the provinces under the National Finance Commission (NFC) Award.
- The federal government's net revenue is estimated at Rs11,751 billion.
- The total federal expenditure has been budgeted at Rs18,771 billion.
- The federal budget deficit is projected to remain at Rs7,020 billion.
- The government has set a provincial surplus target of Rs1,794 billion.
- The overall fiscal deficit is targeted at Rs5,226 billion, equivalent to 3.6% of GDP.
- A primary surplus of Rs2,828 billion, or 2% of GDP, has been projected.
- The government has set a GDP target of Rs143,604 billion for the fiscal year 2026-27.
Defence, development and current spending
The government has allocated Rs3,000 billion for defence in Budget 2026-27. This is an increase of Rs450 billion from the FY2025-26 allocation of Rs2.55 trillion. The approximate increase this year is 17.6% to 18%.
A total of Rs1,000 billion has been earmarked for development projects. The budget document shows that Rs17,495 billion will be spent on ongoing expenses in the next fiscal year.
Interest payments, pensions and civil govt
Debt servicing remains one of the largest expenditure heads, with Rs8,054 billion allocated for interest payments on loans. The government has allocated Rs1,169 billion for pension payments.
Another Rs1,071 billion has been set aside for running the civil government.
The federal budget also includes Rs430 billion for emergency measures in the new fiscal year. The allocation is expected to support the government’s response to urgent national needs during 2026-27.
Federal transfers to provinces
According to the budget documents, a total of Rs8,848.49 billion has been allocated for transfers from the federal government to the provinces in fiscal year 2026-27.
The government has proposed keeping the size of the divisible pool taxes for provinces at Rs8,635.21 billion, while Rs213.27 billion will be transferred through straight transfers.
The provincial share of federal taxes and revenues includes:
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Rs4,246.43 billion from income tax
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Rs2,815.06 billion from sales tax
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Rs946.77 billion from customs duties
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Rs611.69 billion from Federal Excise Duty (FED)
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Rs69.39 billion from the Gas Development Surcharge (GDS)
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Rs93.10 billion from natural gas royalty
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Rs44.59 billion from crude oil royalty
Punjab will receive the largest share under the NFC Award, with an allocation of Rs4,402.83 billion.
Other provincial allocations include:
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Sindh: Rs2,207.18 billion
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Khyber Pakhtunkhwa: Rs1,443.34 billion, including the additional 1% share for counter-terrorism
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Balochistan: Rs795.13 billion
Subsidy allocations for various sectors
The government has proposed a reduction in power sector subsidies for the next fiscal year. The overall subsidy for the power sector has been reduced from Rs893 billion to Rs830 billion.
Major allocations include:
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Rs252 billion to address circular debt in the energy sector
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Rs163 billion for K-Electric through tariff differential subsidies
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Rs81 billion allocated as tariff differential subsidy for Azad Jammu and Kashmir
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Rs248 billion allocated for Inter-DISCO Tariff Differential Subsidy (TDS)
Additional subsidies include:
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Rs34 billion for the merged districts of Khyber Pakhtunkhwa
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Rs3 billion for agricultural tube wells in Balochistan
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Rs48 billion for the Pakistan Energy Revolving Fund
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Rs19 billion allocated to PASSCO for wheat reserves and price differential support
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Rs5.8 billion for the production and supply of urea fertilizer
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Rs8 billion maintained for the electric vehicle scheme
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Rs23.2 billion allocated for the payment of Utility Stores Corporation (USC) arrears
The government has also proposed abolishing subsidies for the petroleum sector in the next fiscal year. In addition, direct payments to Independent Power Producers (IPPs) are proposed to be discontinued under the new budget framework.
Non-tax revenue targets
The total volume of non-tax revenue has been set at Rs5,335.59 billion. The government expects to collect Rs5,093.64 billion through non-tax revenue sources during the next fiscal year.
A record Rs1,676.50 billion collection target has been set for the petroleum levy, reflecting a significant increase compared to previous years.
Key energy-related revenue targets include:
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Rs345 billion from the petroleum levy on LPG
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Rs50 billion from the Climate Support Levy
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Rs1,573 billion from the levy on off-grid captive power plants
State Bank, govt receipts
The government expects to receive Rs1,435.75 billion in profits from the State Bank of Pakistan (SBP). However, this is lower than the Rs2,428 billion profit target set for the current fiscal year.
The collection target from civil administration and other sectors has been set at Rs1,480 billion.
Revenue targets from various government fees and royalties include:
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Rs73.60 billion from passport, citizenship, and naturalization fees
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Rs165.88 billion from collections by affiliated government departments
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Rs1,035 billion from provinces under Article 164 of the Constitution
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Rs45.50 billion from crude oil royalty
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Rs95 billion from natural gas royalty
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Rs70.81 billion from the Gas Development Surcharge
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Rs2.24 billion from the Gas Infrastructure Development Cess (GIDC)
The government has set the following collection targets:
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Rs31.47 billion from the defence sector's own receipts
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Rs4.09 billion from law and order-related collections
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Rs130.38 billion in dividends from government investments and entities
Additionally, the government expects to receive Rs25.6 billion from the United Nations under extraordinary receipts during the next fiscal year.
