Super Tax Abolished for Income Up to Rs 500 Million in Budget 2026-27
A headline relief in Budget 2026-27
One of the most welcome measures in the Finance Act 2026 (Federal Budget 2026-27), effective 1 July 2026, is the abolition of super tax for income up to Rs 500 million. Super tax — a levy imposed in addition to ordinary income tax under the Income Tax Ordinance 2001 — had become a meaningful burden for many profitable companies and high-income persons. Removing it below the Rs 500 million mark delivers direct, tangible relief.
What exactly changed
- Income up to Rs 500 million: super tax is now abolished — no super tax liability on this band.
- Income above Rs 500 million: the rate is reduced from 10% to 8% (covered in detail in our companion article).
This two-part reform lowers the effective tax burden across the board, with the largest proportional benefit going to companies whose income sits below the Rs 500 million line.
Who benefits most
The abolition is especially significant for mid-sized and growing enterprises whose taxable income previously crossed the super tax entry point but remains under Rs 500 million. For these businesses, the change frees up capital that can be redirected to expansion, hiring, technology and working capital.
| Income band | Super tax position 2026-27 |
|---|---|
| Up to Rs 500 million | Abolished — no super tax |
| Above Rs 500 million | Reduced to 8% (from 10%) |
An important caveat: some sectors are excluded
The concession does not apply uniformly. Under the Finance Act 2026, the banking, exploration and production (E&P), and fertilizer sectors do not get the same benefit and continue to face full super tax treatment. If your company operates in these sectors, plan on the basis of the existing super tax exposure rather than the relief.
What this means for tax planning
For eligible companies, the abolition simplifies projections and improves after-tax margins. Finance teams should:
- Re-forecast effective tax rates for the year now that super tax falls away below Rs 500 million.
- Confirm whether the business sits in an excluded sector before booking the saving.
- Revisit dividend, reinvestment and capital allocation decisions in light of higher retained earnings.
Keep your numbers aligned with Zaffre Axon
Accurate tax forecasting depends on clean, current data flowing from payroll, invoices and finance. Zaffre Axon, from Zaffre Tech, centralises that data and auto-applies FBR slabs, allowance taxability, EOBI, sales tax and withholding across the business — so when budget measures like the super tax abolition take effect, your figures stay consistent and your finance team can model the impact with confidence. Zaffre HRM keeps payroll compliant while Zaffreaxon keeps the wider finance picture aligned, all centrally configured.
With Zaffretech as your compliance backbone, you spend less time reconciling and more time planning around relief measures like this one.
References: Income Tax Ordinance 2001; Finance Act 2026 (Federal Budget 2026-27); FBR super tax provisions.
Plan smarter around Budget 2026-27 — Book a demo of Zaffre Axon.