The Section 4AB Surcharge: Why 2025-26 Salary Estimates Add 9% and 2026-27 Adds Nothing
A high salary estimate for 2025-26 can carry a 9% surcharge on top of the salaried table tax. What it applies to, where the threshold bites, and why 2026-27 has none.
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Two schedules that end in different-looking totals
Ask the calculator for a 2025-26 estimate on Rs 12,000,000 of annual salary and it prints annual tax of Rs 3,685,290. Ask for the same salary in 2026-27 and it prints Rs 3,174,000. The second number is simply the salaried table; the first is the table tax of Rs 3,381,000 plus a separate surcharge line of Rs 304,290. That extra line is the section 4AB surcharge, which the 2025-26 schedule in this site’s data declares as 9% applied once taxable income is above Rs 10,000,000. The reference, the threshold and the rate all come from that year’s data record rather than from a hard-coded rule, so the slab page and the calculator read the same fact.
The provenance matters here because this is exactly the sort of provision that changes year to year. The 2025-26 schedule was cross-checked on 2026-10-10 against FBR documents that were live on that date: the Finance Bill 2025, the Salient Features of Budget 2025-26 — which records the surcharge for salaried individuals being reduced from 10% to 9% — and the Finance Act 2026, which withdrew the salary surcharge from 1 July 2026. Treat every figure below as an estimate to verify against current FBR material.
What the 9% is charged on
The most common misreading is to think of the surcharge as another income slab. It is not. Section 4AB, as modelled in this site’s 2025-26 data, charges 9% of the Division I table tax once the taxable-income threshold is passed — 9% of the tax, not 9% of the income, and not 9% of only the portion above Rs 10 million. At Rs 12 million the arithmetic is Rs 616,000 plus 35% of the income above Rs 4.1 million, giving Rs 3,381,000, and then 9% of that full Rs 3,381,000, giving Rs 304,290. Total Rs 3,685,290, an effective rate of about 30.7% of gross income against about 28.2% for the table tax alone.
That base makes the surcharge behave differently from a slab. Because it multiplies the whole table tax by 1.09 rather than attaching to a slice of income, its effect on the top rupees is easy to underestimate: in the 35% band each additional rupee already attracts 35 paisa of table tax, and the surcharge adds 9% of that, about 3.1 paisa, so the marginal cost of income above Rs 10 million in 2025-26 approaches 38 paisa per rupee. When you compare a payslip or a return against an estimate for a 2025-26 high salary, check whether a surcharge component is included before concluding the payroll figure looks too high.
The threshold is tested strictly
The rule in the data reads “above” Rs 10,000,000, and the calculator follows it literally. At exactly Rs 10,000,000 of taxable income the 2025-26 estimate is Rs 2,681,000 with a surcharge of zero. One rupee higher, at Rs 10,000,001, the estimate jumps to about Rs 2,922,290, because the roughly Rs 241,290 surcharge applies to the whole table tax at once, not in proportion to how far past the line you are. This is a cliff, not a slope, and it is a genuine planning consideration for anyone whose annual taxable income will land close to Rs 10 million.
The second detail is that the test is against taxable income, not salary alone. On this site’s model, taxable income is gross salary, bonus and allowances less the deductions you enter. A late-year bonus, a taxable allowance arrears, or a reduced deduction can be enough to take a person from just below the line to just above it, and payroll withholding, which is typically projected monthly, can lag such a jump. If your year-end figures are close to Rs 10 million, recompute on the annual numbers rather than trusting the latest single payslip.
Why the 2026-27 schedule carries none
The 2026-27 data record sets the surcharge to null, on the strength of the Finance Bill 2026, which — as its wording was checked on 2026-10-10 — replaces the section 4AB proviso for this purpose with language to the effect that no surcharge shall be payable, consistent with the Finance Act 2026 withdrawing the salary surcharge from 1 July 2026. There is therefore no surcharge line in a 2026-27 salaried estimate at any income level, and the year’s schedule stands alone.
The comparison across years shows what that withdrawal is worth at the top. At Rs 12 million, the estimate falls from Rs 3,685,290 to Rs 3,174,000, a difference of Rs 511,290, of which Rs 304,290 is the surcharge itself and the rest is the restructured table. At Rs 15 million it falls from Rs 4,829,790 — table tax of Rs 4,431,000 plus surcharge of Rs 398,790 — to Rs 4,224,000, taking the indicative monthly figure from about Rs 402,483 to Rs 352,000. So the whole year-on-year movement for a top-band earner is a combination of the new bands and the surcharge’s removal, and quoting only one of the two understates the change.
Keep the years separate and the sources honest
Because a surcharge belongs to one year’s law rather than to salary taxation generally, a single table that quietly mixed the two years is a standing trap. That is why the surcharge is stored on the 2025-26 year’s data and not in shared logic: an estimate for 2026-27 cannot inherit 2025-26’s 9% by accident, and a revised return or reconciliation for a 2025-26 year must still apply it even though the current schedule no longer contains it. If you are working with both years — a bonus straddling 30 June, or an old return under review — keep the two computations visibly apart.
One point of candour about sources. The official gazette copy of the Finance Act 2025 held by FBR is a scanned image without a text layer, so its First Schedule was confirmed for this project on 2026-10-10 through annotated reproductions published by chartered accountant firms as well as the Finance Bill and budget paper, with the Finance Act 2026 checked directly. That verification chain is recorded in the data file itself. Estimates here are for cross-checking your payroll and planning cash flow; the operative figure is always the one you confirm against FBR’s current material for the year in question.