Pakistan’s Salaried Class Now Poorer Than Ever

Pakistan’s salaried middle class has seen its purchasing power plummet by nearly 50 percent in just four years, even after inflation-backed increments. We’re making more but are still broke. Inflation and back-breaking taxes have wiped out half of the real income of the salaried class, tax advocate Amer Sharif said on X. “I’ve been logging data in real time on how much we salaried people have taken the fall for FBR. In the past 4 years, we have lost 46 percent of our purchasing power, and things haven’t changed despite the recent drop in core inflation. From 29.7 percent inflation in 2024 to 4.1 percent this year, the drop has only slowed the rise in prices of essential items. Our purchasing power has been permanently cut in half and we’re poorer than ever,” another financial expert told ProPakistani. Between 2022 to 2025, gross salaries rose by 56 percent in Pakistan, but income taxes surged by roughly 165 percent, according to Amer’s calculations. Inflation has permanently eroded real incomes, leaving workers with far less to spend in real terms. “The labor worker now charges more, rickshaws are pricey like Uber; everything is too expensive now. The salaried class is exactly where it was 4 years ago: broke and an easy target,” he lamented The hardest blow came in 2024, when salaries surged by 15 percent, but inflation wiped out Rs. 1.38 million from the yearly take-home income of Rs. 3.16 million. The additional tax impact recorded in 2025 so far is Rs. 443,392 for individuals earning an annual salary of Rs. 2.24 million, the highest in the last four years. In 2025 so far, tax on take-home salaries has increased by 44.19 percent compared to a 17 percent increase reported in 2022. For the 2025-26 budget, the federal government is considering a big tax relief package for the salaried class, which could result in savings of up to Rs. 190,000 annually, depending on income level. Under the proposal, individuals earning between Rs. 1.2 million and Rs. 7.8 million annually are expected to benefit from reduced income tax rates. The relief ranges from Rs. 25,000 for those earning Rs. 1.2 million per year, to Rs. 190,000 for those earning Rs. 7.8 million. The tax reduction translates into savings of up to 2.4 percent of gross income for the majority of salary brackets. For instance, someone earning Rs. 3.6 million annually would see their annual tax cut from Rs. 550,000 to Rs. 465,000, saving Rs. 85,000. Similarly, an individual with a Rs. 6 million yearly income would save Rs. 160,000 on their tax payments. Those earning up to Rs. 600,000 per year will remain fully exempt under both current and proposed tax regimes. The International Monetary Fund has endorsed this, the expert added. There is also a proposal to exempt annual income up to Rs. 1 million from income tax. The rationale behind this proposal is that the revenue generated from income tax on salaries has exceeded expectations, creating room for such relief. 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.