Salaried class pays Rs144 billion tax in three months

Salaried income tax collection rises 10.2% YoY in July-September; real estate receipts plunge 38% to Rs35.2 billion after tax cuts, while wholesalers and retailers contribute Rs18.4 billion Pakistan's salaried class paid Rs144 billion in income tax during the first three months of the current fiscal year 2026-27, Rs90 billion more than the combined contribution of retailers and the real estate sector. Provisional Federal Board of Revenue (FBR) data for July-September showed income tax collection from salaried individuals increased by Rs13.4 billion, or 10.2%, from the same period last year. By comparison, retailers and the real estate sector collectively contributed around Rs54 billion during the quarter. The salaried class's annual income tax contribution has increased from Rs391 billion before the start of the IMF programme in 2024 to Rs629 billion in the fiscal year ended June 2026. The increase has continued despite tax relief announced for salaried individuals in the federal budget for FY27. The government estimated the relief at Rs52 billion after reducing applicable tax rates by up to three percentage points and abolishing a 9% surcharge calculated on the highest income tax rate of 35%. It also raised the annual income threshold for application of the maximum 35% tax rate from Rs4.1 million to Rs7 million. Meanwhile, income tax collection from the real estate sector fell 38% to Rs35.2 billion during July-September, declining by Rs22 billion compared with the corresponding period last year. The decline followed reductions in advance income tax rates on property transactions introduced through the budget. The government reduced advance tax rates on the sale and purchase of immovable property by 50%. For property sales, three slabs were consolidated into a single rate of 2.75%, compared with the previous rate of 5.5%. Advance tax on property purchases was reduced from 2.5% to 1.25%. Following the changes, advance income tax collected on property sales dropped 42% to Rs23 billion during the first three months of the fiscal year from Rs39.5 billion in the same period last year, a decline of Rs16.5 billion. Collection on property purchases fell 31% to Rs12.2 billion from Rs17.7 billion, representing a reduction of Rs5.5 billion. The real estate sector had contributed Rs200 billion in income tax in FY2023-24, rising to Rs236 billion in FY2024-25 before the latest reductions in transaction taxes. Tax collection from the trading sector showed little movement during the quarter. Wholesalers and retailers together paid Rs18.4 billion in withholding taxes during July-September, up only Rs244 million, or 1.3%, from the same period last year. Wholesalers contributed Rs6.2 billion, down Rs701 million, or 10%, while retailers paid Rs11.3 billion, an increase of Rs945 million, or 8.3%. The FBR has introduced a fixed tax scheme for traders as part of efforts to increase tax collection from the retail sector, but collections during the first quarter indicate that its contribution remains substantially below that of salaried individuals. The disparity has widened further following the decline in property-related tax receipts, leaving the salaried class's Rs144 billion contribution nearly three times the roughly Rs54 billion collected from retailers and the real estate sector combined. Salaried households are also facing higher indirect costs from energy taxation, including a petroleum levy of Rs80 per litre and a climate support levy of Rs5 per litre, alongside the government's policy of passing international oil prices on to domestic consumers.