Pakistan’s salaried workforce paid Rs 420 billion in income tax during the first nine months of FY2025-26 — more than double the Rs 197 billion collected from the entire real estate sector in the same period — even as the government simultaneously slashed two days’ salary a month from public employees to fund fuel subsidies, according to provisional FBR data published on April 14, 2026.
The figures arrive as the IMF prepares to land in Pakistan mid-May to finalise FY2027 budget parameters, putting structural tax equity — and the government’s proposals to cut property transaction taxes — directly on the negotiating table.
Pakistan’s struggling salaried class paid Rs 420 billion in income tax in just nine months of this fiscal year, while the real estate sector contributed Rs 197 billion despite overall sluggish activity during the past two years, according to provisional data compiled by the Federal Board of Revenue (FBR). The salaried class’s economic hardships have heightened, as on one hand it is forced to cough up higher taxes, and on the other it is facing the brunt of an increase in petrol prices and other household expenses due to the Middle East conflict.
| Taxpayer Category | 9M FY2026 (Jul–Mar) | 9M FY2025 | YoY Change |
|---|---|---|---|
| Total salaried class | Rs 420 billion | Rs 391 billion | +7.5% (+Rs 29bn) |
| Non-corporate employees | Rs 187 billion | — | +12% |
| Corporate sector employees | Rs 134 billion | — | +15% |
| Provincial govt employees | Rs 59 billion | — | −14% |
| Federal govt employees | Rs 41 billion | — | +7% |
| Real estate (total WHT) | Rs 197 billion | ~Rs 168 billion | +17% |
| Plot sales (Sec 236C) | Rs 137 billion | ~Rs 85 billion | +62% |
| Plot purchases (Sec 236K) | Rs 61 billion | ~Rs 73 billion | −16% |
| Capital gains on property | Rs 1.7 billion | Rs 5 billion | −66% |
| Deemed income tax | Rs 1.2 billion | — | — |
The ratio speaks for itself: salaried employees paid Rs 420 billion against the real estate sector’s Rs 197 billion — a 2.13:1 ratio — even though the property sector commands Pakistan’s largest store of private wealth and generates transactions worth trillions of rupees annually.
The salaried class pays about 38% of its gross income in taxes, which is significantly higher compared with regional countries and relative to the real estate sector and retailers. The government has also cut two days’ salary a month from its employees to pay for fuel subsidies.
Three structural factors keep this ratio locked in place. First, salaried income is fully visible to FBR through withholding at source — employers deduct tax before employees see a rupee of their salary, leaving zero scope for under-reporting. Second, income tax slabs for salaried individuals in Pakistan are among the steepest in South Asia at upper brackets, with the Finance Act 2024 maintaining rates that reach 35% for income above Rs 6 million annually. Third, the property and retail sectors have successfully resisted documentation through political influence and administrative gaps that FBR has been unable to close despite repeated attempts.
The government’s drive to broaden the tax base has not helped much, and it may face resistance from the International Monetary Fund to provide any substantial tax relief to the overburdened salaried class. Due to constant pressure, the government increased tax rates on the real estate sector, yet it could not deepen the base and is mostly relying on upfront withholding tax collection.
The real estate data reveals a structural paradox. Withholding tax collections on plot sales rose 62% to Rs 137 billion during the first nine months of the fiscal year. Withholding tax collections on plot purchases fell 16% to Rs 61 billion due to a reduction in rates in the budget equal to an increase in the rates on the sale of plots.
The rise in plot sales tax collection reflects rate increases in Budget 2025-26 — not a broader base. Meanwhile, capital gains tax from real estate investment — the true measure of property wealth contribution — collapsed entirely. The government was not able to collect any meaningful tax from the real estate sector on account of gains made on investments. It collected Rs 1.7 billion compared with Rs 5 billion in the last fiscal year, also reflecting the harsh ground realities of a slump that the sector was facing during the past two years. Under a constitutionally questionable levy of deemed income tax, the government could hardly collect Rs 1.2 billion
Combined, capital gains and deemed income tax — the two levies that most directly target accumulated property wealth — yielded just Rs 2.9 billion out of the sector’s Rs 197 billion total. The other Rs 194 billion comes from transaction taxes (Section 236C and 236K) — charges on movement of property, not on the wealth parked within it.
A concerning sub-trend within the salaried data deserves attention. Provincial government employees paid Rs 59 billion in income taxes — down 14% year-on-year, marking the fourth consecutive monthly decline in this category. This accelerating drop likely reflects two converging factors: the two-days-salary-per-month fuel subsidy deduction reducing gross taxable salary, and the broader fiscal pressure on provincial payrolls from the NFC relief package disbursements absorbing available cash.
Federal government employees moved in the opposite direction — Rs 41 billion, up 7% — consistent with central government salary increases and a larger federal headcount.
The IMF mission is landing in Pakistan by the middle of next month to scrutinise and approve the budget before it is even presented to the National Assembly and the federal cabinet for approval.
The government has put forward several proposals for property sector tax relief to be discussed with the IMF. There is a strong view to reduce the tax rate on the sale of plots from 4.5% to 1.5%. On purchases, there is a proposal to cut the rate from 1.5% to 0.25%. There is also a proposal to abolish transaction taxes on the first ownership of a home or plot of up to one kanal. Another proposal suggests treating housing loan instalments as an expense instead of income to reduce the tax burden.
Prime Minister Shehbaz Sharif has already expressed a desire to abolish the 1% deemed income tax on properties, which has been challenged in courts over its constitutionality.
From a revenue arithmetic standpoint, these proposals add up to a potential loss of Rs 60–90 billion in property sector collections — precisely at a time when FBR’s nine-month shortfall against the Rs 12,970 billion target stands at Rs 610 billion. The IMF will ask what replaces that revenue. The answer, unless FBR documents new sectors, is inevitably the salaried class.
For the roughly 3.5 million salaried Pakistanis currently in the active taxpayer list, the 9M FY2026 data delivers two messages. The burden is rising even in a year of economic recovery — Rs 420 billion in nine months already exceeds the full-year FY2024 collection in many comparable periods. And the fuel crisis has added insult to injury: petrol at Rs 378.41/litre and diesel at Rs 520.35/litre have driven up commuting costs, household expenses, and food inflation — all borne disproportionately by fixed-income earners with no mechanism to pass costs forward, unlike traders and property owners. The FY2027 budget, shaped in May under IMF scrutiny, will determine whether any relief arrives — or whether the 38% effective rate becomes the new floor.