Budget 2026-27 — A Payroll Compliance Checklist for Companies
Tick every box before the July pay run
The Finance Act 2026 (Federal Budget 2026-27) takes effect on 1 July 2026. Use this checklist to make sure your first pay run of the new tax year is fully compliant. Work through each item and confirm it in your payroll system before you process salaries.
1. Salary tax 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. Allowances and exemptions
- Confirm house rent, conveyance, utilities and mobile allowances are treated as fully taxable.
- Apply the medical allowance exemption (10% of basic) only where free treatment or insurance is not separately provided — Clause 139 is unchanged.
- Cap provident fund exemption at the lower of 10% of basic or Rs 150,000 a year.
3. Statutory deductions
- Set EOBI at 5% employer plus 1% employee of the minimum wage; confirm the provincial minimum wage (Budget proposes Rs 40,700).
- Verify any provincial social security and professional tax settings.
4. Filer and withholding logic
- Flag filer versus non-filer status; apply Tenth Schedule enhanced rates where required.
- Track per-vendor annual thresholds for any contractor payments run through payroll (Rs 75,000 goods, Rs 30,000 services).
5. Records and audit readiness
- Keep machine-readable financial statements — increasingly mandatory.
- Retain proof of every deduction in case of a faceless audit via the National Faceless Centre.
- Run a parallel calculation on a sample of employees to catch boundary errors before going live.
Let the checklist run itself
Every item above is a setting somewhere — and manual settings drift. 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 so the whole company stays consistent. The Zaffre Axon finance module extends the same control to withholding and sales tax. Zaffretech and Zaffreaxon clients update one place and every pay slip follows.
References: Finance Act 2026 (Federal Budget 2026-27); Income Tax Ordinance 2001, First Schedule, Second Schedule Clause 139, Sixth Schedule, Tenth Schedule; EOBI Act 1976; FBR.
Book a demo of Zaffre HRM to turn this checklist into an automated, compliant payroll.