Budget 2025-26: Government Decides to Revise Income Tax Rates for Salaried Class

Lahore: In a key decision regarding the upcoming Budget 2025-26, the government has decided to revise the income tax rates for salaried individuals. The Finance Committee of the National Assembly, under the chairmanship of Naveed Qamar, has agreed to reduce the income tax rate for those earning between 6 to 12 lakh rupees annually from 2.5% to 1%.
According to sources cited by private TV channel Samaa News, the decision was made during a meeting of the Finance Standing Committee. Initially, the tax rate for the 6 to 12 lakh rupees income bracket had been set at 2.5%, but now it will be reduced to 1%. The International Monetary Fund (IMF) had previously agreed to a 1% tax on incomes up to 12 lakh rupees annually.
For the current fiscal year, the tax rate on annual incomes between 6 to 12 lakh rupees is 5%. The government had earlier increased the relief for government employees, raising the tax relief from 6% to 10%, which led to a reduction in the tax rate for this income bracket.
The committee also approved the imposition of tax on pensions above 1 crore rupees annually. A 5% tax will be levied on pensions exceeding 1 crore rupees, while no tax will be applicable on pensions up to 1 crore rupees.
Committee Chairman, Naveed Qamar, stated that individuals receiving a monthly pension of 8.5 lakh rupees or more should contribute to taxes. The Chairman of the Federal Board of Revenue (FBR) pointed out that many countries, including India, impose taxes on pensions. Former Minister Omar Ayub Khan suggested that the FBR should also follow global standards.
However, some committee members, including Omar Ayub, expressed reservations about taxing pensions. Committee member Muhammad Javed raised concerns that this could eventually lead to taxes on even pensions as low as 1 lakh rupees, noting that only judges currently receive pensions over 1 crore rupees.
Additionally, FBR officials revealed that clubs charging membership fees of 1 million rupees or more will be brought under the income tax net. The State Minister for Finance emphasized that these clubs cater to the luxuries of the rich and should be taxed accordingly.
The committee also approved measures for stricter regulation of businesses with cash-to-cash transactions, limiting the ability of registered businesses to adjust taxes in case of losses. The tax rate for online sales will be 1%, while a 5% tax will be applied to physical stores. Furthermore, digital businesses will be required to pay tax based on turnover.
After extensive discussions on the recovery of taxes from defaulters, the committee chairman directed that the legal provisions be improved and presented again for further deliberation.