The federal government has announced expanded tax relief for pensioners in the Federal Budget 2026-27, keeping annual pension income of up to Rs. 10 million fully exempt from income tax.
The measure was unveiled by Finance Minister Muhammad Aurangzeb during his budget speech and is aimed at protecting retirees from the impact of inflation while ensuring a balanced taxation framework.
Under the new policy, pensioners receiving annual pension income of up to Rs. 10 million will continue to enjoy complete tax exemption. However, pension income exceeding this threshold will be subject to a flat tax rate of 5 percent.
The government said the decision reflects its commitment to supporting senior citizens and safeguarding the financial well-being of retired individuals who depend on pension payments as their primary source of income.
The pension relief measure comes as part of a broader package of fiscal and social support initiatives announced in the Budget 2026-27, which also includes tax relief for salaried individuals and adjustments to public sector salaries and pensions.
Officials believe the move will help preserve the purchasing power of pensioners while maintaining fairness and sustainability within the country’s tax system.
