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In a significant effort to alleviate the financial burden on low- and middle-income earners, Pakistan’s government has announced substantial tax relief for the salaried class for the fiscal year 2025–26. Finance Minister Aurangzeb, during a Senate session, confirmed that individuals earning up to Rs 100,000 per month will now face a reduced tax rate of only 1%, down from the previous proposal of 2.5% in the budget.
This decision, made under the direct guidance of Prime Minister Shehbaz Sharif, underscores the government’s commitment to supporting those most affected by inflation. It was proposed 2 days ago by the Senate Standing Committee on Finance and Revenue.
Minister Aurangzeb emphasized, “The salaried segment bears the brunt of inflation and pays its taxes. This reduction is aimed at increasing their disposable income and rebuilding confidence in the tax system.”
While the initial budget proposal suggested a 2.5% tax rate for incomes between Rs600,000 and Rs1.2 million, the latest revision further slashes this to just 1%, from 5% previously. Beyond the lowest income brackets, the government has also introduced tax reductions across other tiers.
Annual incomes up to Rs2.2 million will now be taxed at 11%, down from 15%. Earnings between Rs2.2 million and Rs3.2 million will be taxed at 23%, a reduction from 25%.
To combat the increasing brain drain, the government has additionally proposed a 1% reduction in surcharge for individuals earning more than Rs1 million annually. This measure hopes to incentivize skilled professionals to remain in the country.
These tax adjustments aim to provide much-needed relief to a significant portion of the workforce, potentially boosting consumer spending and fostering greater confidence in the nation’s tax policies.
