Govt considers tax relief for salaried class in budget 2025-26

As Pakistan prepares to unveil its federal budget for the fiscal year 2025–26, preliminary discussions suggest the government is considering tax relief measures aimed at easing the financial burden on salaried individuals.

Sources familiar with the matter indicate that a key proposal under review involves increasing the annual taxable income threshold from the current Rs600,000 to Rs800,000.

This adjustment, if approved, would offer relief to individuals earning more than Rs50,000 per month.

The Federal Board of Revenue (FBR) is also considering revisions to the existing income tax slabs, although the proposed changes are expected to primarily benefit lower-income earners.

There are no immediate plans to extend similar relief to higher-income groups, officials said.

Additionally, authorities are working on simplifying the income tax return process to make it more user-friendly and transparent.

The proposed relief measures are likely to be subject to the approval of the International Monetary Fund (IMF), with whom the government is currently engaged in ongoing negotiations. Officials emphasised that any final decisions will be contingent on the outcome of these discussions.

Among the proposals being considered is a targeted tax break for individuals earning between Rs600,000 and Rs1.2 million annually.

If implemented, this could ease the tax burden on a significant segment of the salaried population.

Separately, the government is also evaluating a new tax framework for pensioners receiving higher incomes.

Under the proposals, pension incomes up to Rs800,000 per year could be taxed at 5 percent, with tax rates progressively increasing for higher income brackets—up to 20 percent for those earning over Rs3 million annually.