Pakistan Plans Tax Relief for Salaried Class in 2025-26 Budget

The upcoming federal budget for 2025-26 is set to introduce significant tax relief measures for the salaried class, including a 2.5% reduction in income tax rates for higher salary brackets and a potential increase in the income tax exemption threshold from Rs600,000 to Rs1 million, aiming to ease the tax burden while maintaining fiscal balance. These relief efforts are expected to offset new taxation measures estimated at Rs500-600 billion, resulting in a minimal or zero net revenue impact. Additionally, proposals to reduce withholding taxes and corporate income tax rates, including cuts to the 'Super Tax,' are also under consideration to support businesses. The government’s decision follows higher-than-expected revenue collection from salaried individuals in the current fiscal year, prompting a commitment to provide tangible relief to this group. These measures reflect a broader strategy to create a more equitable tax structure and encourage economic participation among the middle class. The focus on tax relief is complemented by ongoing discussions about pension taxation benefits, including the availability of up to 45% tax relief on private pension contributions and the ability to carry forward unused allowances, enhancing retirement savings for taxpayers.