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In a major development ahead of the budget 2025-26, the federal government is preparing significant tax relief measures for the salaried class, including a 2.5 percent reduction in income tax slabs, lower withholding taxes, and a potential cut in corporate income tax rates, according to media reports.
The government is planning that if it introduces taxation measures worth Rs500-600 billion, these would be balanced by substantial tax relief measures for the salaried class and businesses, aiming for a minimal or even zero net revenue impact.
Officials have indicated that the upcoming budget will attempt to neutralize the burden of new taxes by offering simultaneous relief. “If tax measures are accompanied by corresponding relief, the overall net revenue impact for the next fiscal year could effectively be zero,” an official source explained.
Sources noted that revenue collection from salaried individuals has exceeded projections during the outgoing fiscal year. This has prompted the government’s commitment to reduce income tax by 2.5 percent across higher salary brackets. Work is actively underway to finalize the exact revisions.
Corporate Sector May Also Get Relief
Additionally, proposals are being considered to lower the corporate tax rate and the much-criticized “Super Tax” imposed on businesses.
A major highlight of the relief plan includes a proposal to raise the income tax exemption threshold under the Income Tax Ordinance, 2001. The exemption limit could be increased from the current Rs0.6 million to Rs1 million, providing further respite to the salaried class.
Officials emphasized that these tax relief measures for the salaried class are aimed at providing tangible relief to the general public while maintaining fiscal balance.
