The federal government has proposed new income tax rates for salaried individuals in the Finance Bill 2026-27. These changes will reduce the tax burden on many middle- and high-income earners, while tax rates for lower-income groups will mostly remain the same.
According to the proposed budget, the annual tax-free income limit will remain Rs. 600,000.
For people earning between Rs. 600,000 and Rs. 1.2 million per year, the tax rate will also remain unchanged at 1% of the amount above Rs. 600,000.
The major tax relief starts for individuals earning more than Rs. 2.2 million annually. Under the proposed changes, the tax rate for income between Rs. 2.2 million and Rs. 3.2 million will be reduced from 23% to 20%.
Similarly, the tax rate for income between Rs. 3.2 million and Rs. 4.1 million will be reduced from 30% to 25%.
The government has also added new tax slabs for higher-income salaried individuals. Under the proposed structure:
- Income between Rs. 4.1 million and Rs. 5.6 million will be taxed at 29%.
- Income between Rs. 5.6 million and Rs. 7 million will be taxed at 32%.
The highest tax rate of 35% will now apply only to annual income above Rs. 7 million. Previously, this highest rate started from income exceeding Rs. 4.1 million.
Another important proposal is the removal of the surcharge on salaried individuals earning more than Rs. 10 million per year. At present, these taxpayers pay an additional 9% surcharge on their total income tax. The proposed Finance Bill removes this extra charge.
Based on the government’s calculations, monthly tax deductions will remain the same for salaries up to Rs. 175,000 per month. Tax relief begins from a monthly salary of Rs. 200,000 and increases as income rises.
The biggest monthly tax savings are expected for people earning Rs. 900,000 and Rs. 1 million per month. This is because their annual income exceeds Rs. 10 million, making them subject to the current 9% surcharge that is proposed to be removed.
For example, a person earning Rs. 300,000 per month will see their monthly tax decrease from Rs. 38,833 to Rs. 34,667, resulting in a monthly saving of Rs. 4,167.
Similarly, a person earning Rs. 500,000 per month will see their monthly tax fall from Rs. 106,750 to Rs. 92,000, giving a monthly saving of Rs. 14,750.
These proposed tax reductions are part of the government’s broader efforts to provide relief to salaried individuals in the 2026-27 budget.
However, the final tax impact will depend on the approval of the Finance Bill by Parliament and the individual’s actual taxable salary after considering allowances, exemptions, and other payroll adjustments.
Here’s the Revised Salary Tax Slabs for year 2026-27:
| Monthly Salary | Monthly Tax Under Proposed Slabs | Monthly Tax Under Existing Slabs | Net Effect |
| Rs. 49,999 | Rs. 0 | Rs. 0 | No change |
| Rs. 60,000 | Rs. 100 | Rs. 100 | No change |
| Rs. 70,000 | Rs. 200 | Rs. 200 | No change |
| Rs. 80,000 | Rs. 300 | Rs. 300 | No change |
| Rs. 90,000 | Rs. 400 | Rs. 400 | No change |
| Rs. 100,000 | Rs. 500 | Rs. 500 | No change |
| Rs. 110,000 | Rs. 1,600 | Rs. 1,600 | No change |
| Rs. 120,000 | Rs. 2,700 | Rs. 2,700 | No change |
| Rs. 130,000 | Rs. 3,800 | Rs. 3,800 | No change |
| Rs. 140,000 | Rs. 4,900 | Rs. 4,900 | No change |
| Rs. 150,000 | Rs. 6,000 | Rs. 6,000 | No change |
| Rs. 175,000 | Rs. 8,750 | Rs. 8,750 | No change |
| Rs. 200,000 | Rs. 13,000 | Rs. 13,500 | Positive — Rs. 500 lower |
| Rs. 225,000 | Rs. 18,000 | Rs. 19,250 | Positive — Rs. 1,250 lower |
| Rs. 250,000 | Rs. 23,000 | Rs. 25,000 | Positive — Rs. 2,000 lower |
| Rs. 275,000 | Rs. 28,417 | Rs. 31,333 | Positive — Rs. 2,917 lower |
| Rs. 300,000 | Rs. 34,667 | Rs. 38,833 | Positive — Rs. 4,167 lower |
| Rs. 350,000 | Rs. 47,500 | Rs. 54,250 | Positive — Rs. 6,750 lower |
| Rs. 400,000 | Rs. 62,000 | Rs. 71,750 | Positive — Rs. 9,750 lower |
| Rs. 450,000 | Rs. 76,500 | Rs. 89,250 | Positive — Rs. 12,750 lower |
| Rs. 500,000 | Rs. 92,000 | Rs. 106,750 | Positive — Rs. 14,750 lower |
| Rs. 600,000 | Rs. 124,500 | Rs. 141,750 | Positive — Rs. 17,250 lower |
| Rs. 700,000 | Rs. 159,500 | Rs. 176,750 | Positive — Rs. 17,250 lower |
| Rs. 800,000 | Rs. 194,500 | Rs. 211,750 | Positive — Rs. 17,250 lower |
| Rs. 900,000 | Rs. 229,500 | Rs. 268,958 | Positive — Rs. 39,458 lower |
| Rs. 1,000,000 | Rs. 264,500 | Rs. 307,108 | Positive — Rs. 42,608 lower |
Use our Salary Calculator to check your annual or monthly tax slabs.
