Pakistan’s salaried individuals paid Rs144 billion in income tax during the first quarter of fiscal year 2026-27, significantly exceeding the combined Rs54 billion collected from the real estate and retail sectors during the same period. Provisional Federal Board of Revenue (FBR) data shows that tax contributions from salaried workers continued to increase, while collections linked to property transactions declined following the government’s decision to reduce advance tax rates by 50%. The figures highlight a widening difference between income tax collected from salaried taxpayers and revenue generated from several other sectors.
Income tax collected from the real estate sector fell 38% year on year to Rs35.2 billion during July to September 2026. The decline followed the reduction in advance taxes on property transactions, a measure endorsed under Pakistan’s International Monetary Fund program. Tax collected on property sales dropped 42% to Rs23 billion from Rs39.5 billion a year earlier, while collections on property purchases decreased 31% to Rs12.2 billion from Rs17.7 billion. The government reduced the tax rate on property purchases from 2.5% to 1.25%, while three previous slabs for property sales were replaced with a single 2.75% rate, compared with the earlier maximum rate of 5.5%.
The impact of the rate changes is particularly notable when compared with the real estate sector’s previous tax contribution. The sector paid Rs200 billion in income tax during fiscal year 2023-24, with its contribution increasing to Rs236 billion in FY26 before the latest reductions in property transaction tax rates took effect. The first-quarter figures for FY27 therefore provide an early indication of how the lower advance tax rates have affected revenue collected from property transactions.
Tax collections from wholesalers and retailers also showed limited growth during the first quarter. Withholding taxes collected from the two segments amounted to Rs18.4 billion between July and September, representing an increase of only Rs244 million, or 1.3%, compared with the same period a year earlier. Wholesalers contributed Rs6.2 billion, down 10%, while retailers paid Rs11.3 billion, an increase of 8.3%. The figures come after the FBR introduced a fixed tax scheme for retailers, but overall withholding tax collections from the wholesale and retail segments remained relatively subdued.
In comparison, income tax paid by salaried workers increased by Rs13.4 billion, or 10.2%, year on year during the first quarter. Their annual tax contribution has also increased substantially over the longer term, rising from Rs391 billion before the IMF program to Rs629 billion by June 2026, according to official figures. The latest quarterly collection therefore continues a broader trend of rising tax payments from salaried individuals, even as the government has introduced measures intended to provide some relief to this taxpayer group.
The government has said that the latest federal budget provided Rs52 billion in relief to salaried taxpayers. The measures included tax rate reductions of up to three percentage points, elimination of a 9% surcharge and an increase in the annual income threshold for the maximum 35% tax rate from Rs4.1 million to Rs7 million. Despite these measures, salaried households continue to face pressure from rising living costs, particularly higher fuel prices and related increases in the prices of everyday goods.
The government is currently passing international oil prices through to domestic consumers while charging a petroleum levy of Rs80 per litre and a climate support levy of Rs5 per litre. Higher fuel costs can also affect the prices of goods and services throughout the economy, including essential items such as fruits and vegetables. This creates an additional cost burden for households whose income tax payments have continued to rise despite changes in the structure of personal taxation.
The latest FBR figures also highlight the continuing challenge of broadening Pakistan’s tax base. Salaried individuals remain a major source of documented income tax revenue, while collections from property transactions have fallen following the reduction in advance tax rates and wholesale and retail withholding collections have shown only modest growth. The figures therefore provide an indication of how tax revenue is being distributed across different segments of the economy during the opening quarter of FY27.
The data also comes against the backdrop of the government’s broader efforts to increase tax compliance and expand the contribution of sectors that have historically generated comparatively lower documented tax revenues. The difference between the Rs144 billion collected from salaried individuals and the combined Rs54 billion from real estate and retailers demonstrates the scale of the contribution currently coming from salaried taxpayers. As the fiscal year progresses, subsequent FBR collections will show whether the gap remains at a similar level or changes as property transactions, retail activity and other taxable sectors respond to the government’s evolving tax framework.
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