Pakistan Considers 2.5% Income Tax on High-Pension Retirees Ahead of IMF Visit
ISLAMABAD – As Pakistan prepares for the arrival of an International Monetary Fund (IMF) delegation on May 14, the federal government is actively reviewing key budget proposals for FY2025–26, including a new tax on high-income pensioners.
Tax on Pensions Over Rs400,000 Proposed
In a bid to meet IMF demands for broadening the tax base and improving fiscal discipline, authorities are planning to impose a 2.5% income tax on monthly pensions exceeding Rs400,000. The move is aimed at high-income retired individuals such as former civil servants, military officers, and judges.
Sources confirm that the IMF has explicitly recommended taxing large pensions to create a more equitable tax structure.
Read More: Government Plans to Reduce Tax Burden on Salaried Class
“This is part of a broader strategy to ensure fiscal sustainability while complying with IMF conditionalities,” an official source stated.
Relief for Middle-Income and Low-Income Earners
Alongside the proposed tax, the government is considering relief measures for low- and middle-income groups. One key option under review is to raise the annual income tax exemption threshold, which is currently set at Rs600,000. The new threshold is expected to provide relief to salaried individuals amid rising inflation and economic pressure.
Budget Talks with IMF Set for May 14
The upcoming visit by the IMF team will focus on finalizing Pakistan’s budgetary framework and revenue targets for the fiscal year 2025–26. Sources within the Federal Board of Revenue (FBR) confirmed that multiple tax proposals are being fine-tuned before the IMF’s arrival.
The government is seeking a careful balance between satisfying IMF loan conditions and providing economic relief to the public, especially with elections on the horizon and rising public discontent over the cost of living.
