ISLAMABAD: Pakistan’s federal government has announced significant tax relief for the country’s salaried class in the budget for fiscal year 2025–26, proposing reduced income tax rates across all salary brackets to ease the financial burden amid persistent inflation and rising living costs.
Presenting the budget in the National Assembly on Tuesday, Finance Minister Muhammad Aurangzeb said the move is aimed at supporting middle and high-income earners who have long shouldered a disproportionate tax burden.
He said the Prime Minister had prioritised relief for the salaried class, and the proposed reforms reflect that commitment.
The most substantial relief is for those earning between Rs600,000 and Rs1.2 million annually. Their tax rate has been reduced from 5% to just 1%, meaning an individual earning Rs1.2 million would now pay Rs6,000 in annual tax, compared to Rs30,000 previously.
Taxpayers earning up to Rs2.2 million a year will see their rate drop from 15% to 11%. For those earning between Rs2.2 million and Rs3.2 million, the rate has been cut from 25% to 23%.
Aurangzeb said the changes are designed not only to provide immediate financial relief but also to keep salaries aligned with inflation and simplify the tax structure.
He added that the government wants to create a more balanced system that encourages compliance and supports economic activity.
To help retain skilled professionals, the budget also proposes a 1% reduction in surcharge on incomes above Rs1 million.
“The government recognises that Pakistan’s top talent faces some of the highest taxes in the region,” Aurangzeb said. “We want to give them a reason to stay.”
Pakistan announced the total budget outlay at Rs17.573 trillion for FY2025–26, reflecting a 7% cut from the Rs18.9 trillion allocated in the previous fiscal year.
The government has set a growth target of 4.2% for the upcoming fiscal year, up from an expected 2.7% for the outgoing year.
Aurangzeb said the economy had stabilised, and the government now expects a current account surplus of $1.5 billion, with remittances forecast between $37–38 billion.
