Budget FY2025-26: relief for salaried class, tax rates slashed

ISLAMABAD: Finance Minister Muhammad Aurangzeb said in his speech that a significant reduction in income tax rates is proposed for salaried people in all income slabs. “This relief will not only simplify the tax structure but will also ensure a balance between inflation and take-home salary by reducing the tax burden on middle-income earners.”

The tax rate for those earning a salary of Rs600,001 to Rs1,200,000 has been reduced from 5 per cent to just 2.5 per cent. Taxes for different salary brackets can be checked here.

For those earning from Rs1,200,000 to Rs2,200,000, the minimum tax rate is proposed to be reduced to 11 per cent instead of 15 per cent.

For those falling in the Rs2,200,001-Rs3,200,000 category, the new rate is proposed at 23 per cent. Currently, it is 25 per cent.

It is proposed to reduce the tax rate from 25 per cent to 23 per cent for those earning between Rs. 222,000 and Rs 322,000 lakh. This move reflects the government’s commitment to make taxes fairer and reduce the burden on salaried individuals.

Similarly, the government is aware that the country’s best professional workforce is facing the highest taxes in the region. As a result, there is a fear that the most talented individuals may migrate out of the country. Therefore, to prevent brain drain from the country, it is proposed to reduce the surcharge imposed on individuals earning more than Rs 10 million by 1 per cent.

PENSIONS AND SALARIES

The budget has proposed a 10 per cent increase in government employees’ salaries and a 7 per cent increase in pensions. It has proposed a 30 per cent disparity allowance for employees from Grade-1 to Grade-16.

Also read: Budget FY205-26: PKR 1 trillion allocated to PSDP, roads infrastructure in limelight