Salaried Class Likely to Get Tax Relief in Budget 2025-26 — IMF Approval Still Pending
As Pakistan prepares its federal budget for the fiscal year 2025-26, early proposals hint at potential tax relief for the salaried class, particularly those in lower to middle-income brackets. However, these proposals are still under review and will only move forward after consultations with the International Monetary Fund (IMF).
Taxable Income Limit May Rise to Rs 800,000
According to sources in the Federal Board of Revenue (FBR), the government is considering raising the annual taxable income threshold from Rs 600,000 to Rs 800,000. This move is expected to ease the tax burden on individuals earning monthly salaries slightly above Rs 50,000—especially those falling within the first income tax slab.
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Additionally, tax brackets for incomes between Rs 600,000 and Rs 1.2 million are expected to be adjusted to offer further relief amid rising inflation and cost of living.
“Three proposals are being considered: increasing the first slab threshold, revising tax slabs for middle-income earners, and simplifying income tax return forms,” said an FBR official.
No Tax Relief for High-Income Earners
Officials have confirmed that no significant tax relief is planned for high-income groups in the upcoming budget. The focus remains on providing targeted relief to lower and middle-income salaried individuals, aligning with Pakistan’s current economic challenges and IMF conditions.
Pensioners May Face New Tiered Tax
While salaried workers could benefit, pensioners may face a new tax regime. A tiered tax system is under review for annual pension income, with rates ranging from 5% to 20%, depending on income levels:
- 5% tax on pension income up to Rs 800,000 per year
- 10% on income between Rs 800,000 and Rs 1.5 million
- Up to 20% for higher-income pensioners
This proposal is still in its preliminary phase and may undergo revisions following consultations with stakeholders and IMF officials.
IMF’s Role Remains Pivotal
As Pakistan remains under close observation by the IMF due to its ongoing fiscal challenges, final approval for these budget proposals will depend heavily on the Fund’s assessment. The government aims to strike a balance between revenue generation and public relief, particularly in light of increasing economic pressure on the working class.
Aiming for Relief Amid Economic Strain
The proposed changes reflect an effort to support middle-income households during a time of economic uncertainty, with the government hoping to introduce a more equitable and simplified tax system.
Stay tuned for updates as the Federal Budget 2025-26 takes shape, and the government finalizes its plans in coordination with the IMF.
