What's in Budget 2025-26 for common man?

The federal government is gearing up to unveil a Rs17.6 trillion budget for the fiscal year 2025-26 on Tuesday, with projected revenues expected to hit Rs19.4 trillion and a tax collection target set at Rs14.13 trillion.

A significant portion of the budget — Rs6.2 trillion — has been earmarked for debt servicing, underscoring the fiscal challenges ahead, including a sizeable budget deficit. But what does this mean for the average citizen?

Some relief measures are likely for government employees. Proposals include a 10% increase in salaries along with a 5% to 7.5% rise in pensions.

Additionally, a disparity allowance of 30% is under consideration for employees in Grade 1 to 16, while officers in Grades 17 to 22 may see a 15% salary bump. Discussions are also underway to merge the 2022 ad-hoc allowance into the basic pay scale.

In terms of taxation, a major proposal is to raise the annual tax-free income threshold from Rs600,000 to Rs1 million. If implemented, salaries up to Rs83,000 per month would be exempt from income tax—a significant increase from the current Rs50,000 exemption limit.

For the automobile sector, there could be mixed outcomes. Luxury cars are likely to become more expensive due to increased advance taxes, while used and smaller cars may see price reductions if proposed relaxations on import duties are approved.

Prices of small vehicles might drop below Rs2 million, offering some respite for middle-income families.

The upcoming budget is also expected to slash import duties on more than 7,000 items, including cosmetics like lipsticks, mascaras, perfumes, body sprays, lotions, and other personal care products.

Fashion accessories such as imported footwear, handbags, sunglasses, and grooming products may also benefit from duty reductions of 2% to 5%.

Read more: Budget FY26: Cash payment for petrol, retail purchases to attract additional taxes

On the downside, consumers might face higher costs on several packaged food and grocery items.

The government is reportedly planning to expand the scope of Federal Excise Duty (FED) to include soft drinks, instant noodles, ice cream, frozen meats, chips, biscuits, sauces, and ready-to-eat meals in a bid to increase tax revenues.

Officials emphasize that these measures are intended to broaden the tax base while offering selective relief to various segments of the population.