The federal government is proposing up to a 10% reduction in income tax rates across various slabs for the salaried class in the 2025–26 budget, pending approval from the IMF during discussions from May 14 to 22. If implemented, the relief could offer around Rs. 50 billion in savings to salaried taxpayers.
One key proposal includes exempting annual income up to Rs. 1 million from taxation. This suggestion stems from the Federal Board of Revenue’s (FBR) observation that income tax collections from salaries have surpassed targets. Additional proposals include reducing corporate tax rates, cutting the super tax by 0.5%, lowering input withholding taxes, and eliminating taxes on raw material imports and property transactions.
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So far in FY25, salaried workers have paid over Rs. 450 billion in taxes, with projections reaching Rs. 550 billion by June. Currently, middle-income earners making Rs. 200,000–300,000 monthly face effective tax rates of 40–45%, while those earning over Rs. 1 million pay an extra 10% surcharge on top of their 40% rate.
