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ISLAMABAD: The federal government has reportedly secured income tax relief for the salaried class during ongoing budget negotiations with the International Monetary Fund (IMF), marking a crucial concession by the global lender aimed at easing the financial burden on working individuals.
According to details, the international lender has agreed to reduce income tax rates across all salary slabs, bringing significant relief to salaried employees. The concession will be formalized through amendments to Section 129 of the Income Tax Ordinance, which governs tax exemptions and concessions in Pakistan.
One of the key proposed reforms includes raising the annual tax-free income threshold from the current Rs600,000 to Rs1 million. This means individuals earning up to Rs83,000 per month will be exempt from income tax—up from the current Rs50,000 monthly exemption.
Revised Tax Structure
As part of the IMF income tax relief for salaried class, the revised tax structure suggests a decrease in the rate for Rs100,000 monthly income from 5% to 2.5%. Similarly, income of Rs183,000 per month could be taxed at 12.5%, down from the current 15%. Employees earning Rs267,000 monthly might see their tax rate drop from 25% to 22.5%, while those making up to Rs333,000 may benefit from a reduced rate of 27.5%, compared to the existing 30%. The top tax rate could also be lowered to 32.5% from 35%.
In a parallel breakthrough, the IMF has also accepted Pakistan’s stance on its essential defence spending. Sources privy to the talks confirmed that Islamabad emphasized the urgency of maintaining adequate defence funding, a point the IMF has now reportedly agreed to accommodate in the upcoming fiscal framework.
Moreover, an inflation-adjusted salary hike is expected in the upcoming federal budget for 2025-26 to support the salaried class amid rising inflation. Simultaneously, the government is advancing measures to discourage cash transactions and push digital payments.
