Govt Proposes 10% Tax Relief for Salaried Class in Upcoming Budget

The federal government has proposed up to a 10 percent cut in income tax rates across different slabs for the salaried class in the upcoming budget, subject to approval from the International Monetary Fund (IMF) in talks starting this week. The relief is expected to provide a benefit of approximately Rs. 50 billion to salaried individuals in FY26. Talks between Pakistan and the IMF are scheduled to take place from May 14 to 22, 2025. There is a proposal to exempt annual income up to Rs. 1 million from income tax. The rationale behind this proposal, as per sources in the Federal Board of Revenue (FBR), is that the revenue generated from income tax on salaries has exceeded expectations, creating room for such relief. Sources said FBR is also considering a reduction in the corporate income tax rate. There is also a proposal to decrease the super tax rate by half a percent. The proposals also include a potential reduction in input withholding taxes and the complete elimination of withholding tax on the import of raw materials. FBR is considering abolishing the federal excise duty on the buying and selling of property. In the first ten months of the current fiscal year (July–April), the salaried class has already contributed over Rs. 450 billion in taxes. FBR estimates that this amount will reach Rs. 550 billion by the end of June 2025. Middle-income earners with monthly salaries ranging between Rs. 200,000 and Rs. 300,000 paid effective tax rates of around 40–45 percent. Higher-income individuals earning above Rs. 1 million per month are subject to a 10 percent surcharge beside their 40 percent tax rate.