Islamabad – Finance Minister Muhammad Aurangzeb, while unveiling the PKR 17.57 trillion federal budget for FY2025-26, announced several relief measures focused on the salaried class, pensioners, and government employees.
To ease inflationary pressure, the federal government has proposed a 10% increase in salaries for government employees and a 7% hike in pensions. Additionally, the Special Conveyance Allowance for persons with disabilities is set to increase from PKR 4,000 to PKR 6,000 per month. A 30% Disparity Reduction Allowance is also proposed for select government employees.
In recognition of the Armed Forces’ services, a Special Relief Allowance has been proposed for officers, JCOs, and soldiers. This provision will be funded from the already allocated defence budget of PKR 2,550 billion.
Highlighting relief for the middle-income group, the finance minister announced significant cuts in personal income tax rates:
For those earning between PKR 600,000 to PKR 1.2 million annually, the tax rate has been reduced from 5% to 1% — reducing the tax amount from PKR 30,000 to PKR 6,000.
For annual income between PKR 1.2 million to PKR 2.2 million, the rate has been slashed from 15% to 11%.
Individuals earning PKR 2.2 million to PKR 3.2 million will now pay 23% tax instead of the current 25%.
To discourage the ongoing brain drain, the surcharge on income exceeding PKR10 million has also been reduced by 1%.
New Tax on High Pensions
In a controversial move, the budget introduces a 5% income tax on annual pensions exceeding Rs10 million, targeting a small high-income group of retirees.
Expansion of Social Support
The Benazir Income Support Programme (BISP) will see a 21% increase in allocation, reaching PKR 716 billion. Under the expanded Kafaalat program, support will be extended to 10 million families.
These fiscal measures are part of the government’s broader strategy to revive economic productivity and stabilise public finances while addressing the cost-of-living concerns of ordinary citizens.
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