Govt Proposes Major Income Tax Relief for Salaried Class
Income tax relief the government is considering income tax cuts in the federal budget for FY 2025–26, which would provide a major alleviation to salaried employees in Pakistan. The proposed cuts would relieve some burden from middle- and lower-income earners and also simplify the structure of taxes for all.
Relief Across All Income Slabs
Presenting the budget, Finance Minister Muhammad Aurangzeb emphasized Prime Minister Shehbaz Sharif’s commitment to reducing taxes for salaried individuals.
“Guided by this objective, we’ve proposed tax cuts across all slabs,” Aurangzeb said. “This initiative aims to streamline the tax system while helping individuals cope with inflation by boosting their net salaries.”
Who Benefits and How?
The proposed reforms introduce reductions of up to 4% across different tax brackets. Specifically:
- For individuals with taxable incomes of Rs600,000 to Rs1.2 million annually (i.e., Rs50,000 – Rs100,000 per month), the maximum income tax rate dropped from 5% to 1%, meaning an individual making Rs100,000 a month will pay Rs6,000 in taxes for the year, as opposed to Rs30,000.
- Taxpayers with income up to Rs2.2 million will see a total reduction of 4% in tax rate (from 15 % to 11%).
- For taxpayers with incomes of up to Rs3.2 million annually, they will be getting relief in terms of a reduction of 2% in tax rate, that is from 25% to 23%.
Addressing Brain Drain and Economic Pressure
Additionally, the government has proposed a 1% decrease in the surcharge levied on individuals whose job earnings exceed Rs10 million annually. This is likely an aim on combating the brain drain issue and to excite high earners to stay in Pakistan and not look at tax havens abroad.
Tax Contribution of the Salaried Class
Salaried taxpayers, who contribute to the greatest amount of direct taxes, have always felt burdened. In the first eight months of this fiscal year, they paid Rs331 billion in income taxes — which is an eye-popping 1,350% more than retailers.
For reference, the same group of people paid Rs211 billion in the same period last year — which is a 56% increase. By the end of the fiscal year, they had contributed Rs368 billion in tax.
No Representation in IMF Talks
Given these important contributions, it was surprising that the government apparently did not advocate for salaried individuals with the International Monetary Fund (IMF). Experts say taxing gross income without deductions for expenses is unjust to salaried workers.
