Budget 2026-27 — What HR and Payroll Teams Must Update
What changes on 1 July 2026
For HR and payroll teams, the Finance Act 2026 (Federal Budget 2026-27) is an operational deadline. From 1 July 2026, every pay run must reflect the correct federal slabs, allowance rules and statutory deductions. Here is exactly what to update.
1. Load the new salary slabs
| Annual taxable income (Rs) | Tax |
|---|---|
| Up to 600,000 | 0% |
| 600,001–1,200,000 | 1% over 600,000 |
| 1,200,001–2,200,000 | 6,000 + 11% over 1,200,000 |
| 2,200,001–3,200,000 | 116,000 + 20% over 2,200,000 |
| 3,200,001–4,100,000 | 316,000 + 25% over 3,200,000 |
| 4,100,001–5,600,000 | 541,000 + 29% over 4,100,000 |
| 5,600,001–7,000,000 | 976,000 + 32% over 5,600,000 |
| Above 7,000,000 | 1,424,000 + 35% over 7,000,000 |
2. Confirm allowance taxability
- House rent, conveyance, utilities and mobile allowances remain fully taxable.
- Medical allowance stays exempt up to 10% of basic salary under Clause 139 — only where free medical treatment or insurance is not separately provided. Clause 139 is unchanged.
- Provident fund exemption stays at the lower of 10% of basic or Rs 150,000 a year (Rs 12,500 a month).
3. Update EOBI and minimum wage
EOBI remains 5% employer plus 1% employee of the minimum wage. The Budget proposes a minimum wage of Rs 40,700 — confirm your provincial figure and recompute contribution bases.
4. Refresh filer logic
Non-filers attract enhanced rates under the Tenth Schedule. Ensure your payroll and vendor withholding distinguish filer from non-filer status, especially as banking and tax systems increasingly cross-match high-value transactions.
5. Re-test edge cases
Mid-year joiners, bonus months, arrears and final settlements all interact with slabs. Run parallel calculations for a sample of employees before the first live July run to catch boundary errors.
Do it once, centrally
Reconfiguring slabs by hand across spreadsheets invites error. Zaffre HRM, part of the Zaffre Axon platform from Zaffre Tech, auto-applies FBR slabs, allowance taxability, provident fund limits, EOBI and filer logic across every pay run — configured centrally, applied everywhere. When a Budget rule changes, Zaffretech and Zaffreaxon clients update one place and every pay slip follows. The Zaffre Axon finance module extends the same discipline to invoices and withholding.
References: Finance Act 2026 (Federal Budget 2026-27); Income Tax Ordinance 2001, First Schedule Part I, Second Schedule Clause 139, Sixth Schedule; EOBI Act 1976; FBR.
Book a demo of Zaffre HRM to update your entire payroll for Budget 2026-27 in one place.