Government decides against taxing pensions in FY25 budget

ISLAMABAD: The government decided against accepting the proposal to tax pensions in the fiscal year (FY) 2024-2025 on Monday.

Under the guidance of the International Monetary Fund (IMF), Pakistan has implemented various changes to its fiscal policies. These adjustments include the sale of state-owned enterprises (SOEs) and initiatives to digitize processes, aimed at expanding the tax base and increasing revenue generation.

Read more: Privatisation plan for 81 entities presented to PM

The Federal Board of Revenue (FBR) had earlier proposed taxing pensions through the Finance Bill 2024. The revenue board suggested a 10 per cent tax on pensions exceeding Rs100,000 per month. However, the government eventually decided to scrap the proposal.

Instead, the government directed tax authorities to explore alternative revenue measures to prevent taxing pensioners.

This decision followed virtual discussions between senior tax officials, the IMF, and Pakistani authorities on budget proposals. While they deliberated proposals for uniform taxation on both the business and salaried classes, they also communicated the government’s stance on taxing pensions during these talks.

Finance Minister Muhammad Aurangzeb was able to persuade the IMF to exclude taxing monthly pensions in the upcoming budget.

The negotiations with the IMF continue as both parties agreed to further virtual discussions on tax proposals. Meanwhile, the government said it remained focused on presenting a comprehensive budget plan.

Earlier, the government assured the public of “providing relief” in the upcoming budget. Despite challenges like floods and global economic conditions, the government said the nation’s progress toward development.

Read more: Government sets 12 per cent inflation target for FY 2024-25

The government also stated it expected a decline in the inflation rate, citing significant reductions in food inflation and a 30 per cent increase in tax collection in the current FY.

Pakistan is set to unveil its annual budget on June 10, following a brief postponement from the original date of June 7.