Islamabad: In a major relief for Pakistan’s salaried class, Finance Minister Muhammad Aurangzeb on Tuesday announced a significant reduction in income tax rates in the federal budget for FY2025-26. The decision is part of a broader plan to ease the financial burden on middle-income earners and counter Pakistan’s ongoing brain drain.
Presenting the Rs17.573 trillion budget in the National Assembly, Aurangzeb said:
“We are providing tax relief to those who need it the most — the salaried class.”
Key income tax changes for salaried individuals:
Annual Income Rs600,000–1.2 million: Tax rate slashed from 5% to 1%, cutting the payable amount from Rs30,000 to Rs6,000.
Annual Income Rs1.2 million–2.2 million: Tax rate reduced from 15% to 11%.
Annual Income Rs2.2 million–3.2 million: Tax rate cut from 25% to 23%.
Additionally, the surcharge on high-income earners (those earning above Rs10 million annually) has been reduced by 1% to help retain top talent in the country.
Aurangzeb also promised a simplified tax filing system from July onwards to encourage compliance and improve ease of doing business.
These tax revisions come amid a broader effort to raise Pakistan’s tax-to-GDP ratio to 14% and to transform the Federal Board of Revenue (FBR) into a more efficient, tech-enabled institution.
The budget also includes a 10% increase in government salaries and a 7% rise in pensions, reflecting the government’s attempt to cushion citizens from inflation, which is targeted at 7.5% for the upcoming year.
The new measures are expected to offer meaningful relief to white-collar workers, who have long shouldered a disproportionate share of the tax burden in Pakistan.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
