IMF tax relief Pakistan In a significant development for Pakistan’s middle class, the International Monetary Fund (IMF) has agreed in principle to reduce income tax rates for salaried individuals in the upcoming 2025-26 federal budget. The decision followed critical negotiations held between IMF officials and Pakistan’s Federal Board of Revenue (FBR) on Friday night.
IMF approves major tax cuts
The agreement, if finalized, is expected to offer financial relief worth approximately Rs. 56 to 60 billion in the next fiscal year. Among the key proposals is a reduction in the tax rate on the first income slab, which covers annual earnings from Rs. 600,000 to Rs. 1.2 million. The FBR has suggested slashing this rate from 5 percent to 1 percent. This would bring down the annual tax for income up to Rs. 100,000 from Rs. 30,000 to just Rs. 6,000. However, the IMF has recommended a compromise at 1.5 percent, which would set the payable tax at Rs. 9,000 instead.
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For higher income brackets, a 2.5 percent reduction per slab is also under discussion. Additionally, the maximum income tax rate could be brought down from 35 percent to 32.5 percent. Discussions on the final figures are still ongoing as both sides work out the impact and feasibility.
The IMF has also advised the government to gradually rationalize the 10 percent surcharge and Super Tax imposed on certain high-income groups, to align with long-term fiscal sustainability.
In a separate issue, the IMF criticized the government’s move to allocate 2,000 megawatts of electricity for cryptocurrency mining without first obtaining clearance from the Energy Ministry and NEPRA. This allocation has raised concerns about regulatory oversight and resource management.
The proposed tax changes are part of a broader strategy to balance economic reforms with public relief, particularly for Pakistan’s salaried class. If implemented, the tax relief could boost disposable income for millions while still keeping the country aligned with IMF loan program requirements.
