Federal Budget 2025-26: Major Tax Relief Expected for Salaried Class, Salary Hike Likely for Govt Employees

Islamabad: The Government of Pakistan is preparing to offer significant relief to the salaried class and government employees in the upcoming Federal Budget 2025-26, according to official sources. The proposals include reductions in income tax rates, increases in public sector salaries, and sector-specific relief measures under the special directives of Prime Minister Shehbaz Sharif.
Sources indicate that a 2.5% reduction in income tax rates across multiple slabs is under consideration. As per the proposed adjustments:
Monthly income of Rs 100,000 would be taxed at 2.5%, down from 5%.
Income of Rs 183,000/month would be taxed at 12.5%, down from 15%.
Those earning Rs 267,000/month may see their tax rate drop to 22.5%, from the current 25%.
Salaries of Rs 333,000/month may be taxed at 27.5%, compared to the current 30%.
A salary increase for government employees is also being proposed, with an official announcement expected during the budget speech scheduled for mid-June.
Additionally, small farmers are likely to benefit from relief measures such as low-interest loan schemes and reduced input costs. The government is also planning tax incentives for the industrial and construction sectors, including the removal of Rs 200 billion in withholding taxes on raw materials, and reductions in taxes on materials used in construction.
According to insiders, the government has held detailed consultations with the International Monetary Fund (IMF) regarding these proposals. The IMF’s initial response has been described as positive, although it has asked for a comprehensive alternative revenue plan in exchange for the relief measures. Pakistan’s economic team has reportedly submitted the necessary briefings.
The final approval of these proposals will be made during the official budget presentation by the Finance Minister later this month.