Salaried Class Pays Rs. 144 Billion Tax in Q1, Far More Than Retailers and Real Estate Combined

Pakistan’s salaried class paid Rs. 144 billion in income tax during July to September, exceeding the combined Rs. 54 billion collected from retailers and the real estate sector by Rs. 90 billion, as tax collections from property transactions declined following a 50 percent cut in advance tax rates.

Provisional Federal Board of Revenue (FBR) data shows income tax collected from the real estate sector fell 38 percent year over year to Rs. 35.2 billion in the first quarter of fiscal year 2026-27. The decline followed the government’s decision to halve advance taxes on property sales and purchases, a reduction endorsed under the International Monetary Fund (IMF) program.

Tax collection from property sales dropped 42 percent to Rs. 23 billion from Rs. 39.5 billion a year earlier. Collections on property purchases fell 31 percent to Rs. 12.2 billion from Rs. 17.7 billion. The government reduced the tax rate on property purchases from 2.5 percent to 1.25 percent, while a single 2.75 percent rate replaced three slabs for property sales, down from the previous 5.5 percent rate.

The real estate sector paid Rs. 200 billion in income tax in fiscal year 2023-24, rising to Rs. 236 billion in fiscal year 2025-26 before the latest rate reductions took effect. The latest figures show the impact of the cuts on revenue from property transactions.

Meanwhile, withholding taxes collected from wholesalers and retailers totaled Rs. 18.4 billion in the July to September quarter, up just Rs. 244 million, or 1.3 percent, from a year earlier. Wholesalers paid Rs. 6.2 billion, down 10 percent, while retailers contributed Rs. 11.3 billion, an increase of 8.3 percent.

The FBR introduced a fixed tax scheme for retailers, but the reported collections indicate little overall growth in withholding taxes from the wholesale and retail sectors. Combined income tax payments from retailers and the real estate sector stood at Rs. 54 billion, compared with Rs. 144 billion from salaried individuals.

Income tax paid by salaried workers increased by Rs. 13.4 billion, or 10.2 percent, year over year in the first quarter. Their annual contribution also rose from Rs. 391 billion before the IMF program to Rs. 629 billion by June 2026, according to official figures.

The government said its latest budget provided Rs. 52 billion in relief to salaried taxpayers through tax rate reductions of up to 3 percentage points, the abolition of a 9 percent surcharge, and an increase in the annual income threshold for the maximum 35 percent tax rate from Rs. 4.1 million to Rs. 7 million.

However, salaried households continue to face pressure from higher fuel costs. The government is fully passing on international oil prices and charging a petroleum levy of Rs. 80 per liter alongside a climate support levy of Rs. 5 per liter. These costs are also contributing to increases in the prices of everyday goods, including fruits and vegetables.

The tax disparity comes despite Prime Minister Shehbaz Sharif’s earlier promise to reduce the burden on salaried workers after broadening the tax base. The latest figures show that revenue from salaried individuals has continued to rise while collections from property transactions have fallen and wholesale and retail tax payments have remained largely stagnant.

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