Budget 2025-26: Tax Relief Proposed for Salaried Class, IMF Responds Positively

Islamabad: The federal government is considering major income tax relief for the salaried class in the upcoming 2025-26 budget, with proposed reductions in tax rates across various income slabs. The proposals have received a positive initial response from the International Monetary Fund (IMF), though the Fund has stressed the need for an alternative revenue plan to offset the relief measures.
According to official sources, virtual negotiations between Pakistan and the IMF will resume today, focusing on budget targets, proposed relief measures for the salaried and industrial sectors, and alternative revenue strategies.
Under the proposed revisions to income tax slabs:
Monthly income of Rs. 100,000 would see the tax rate reduced from 5% to 2.5%.
For Rs. 183,000 per month, the tax rate would be cut from 15% to 12.5%.
A monthly salary of Rs. 267,000 would have its tax rate lowered from 25% to 22.5%.
Monthly income of Rs. 333,000 would see a decrease in the tax rate from 30% to 27.5%.
The government is also considering significant incentives for the industrial and agricultural sectors. A proposal to abolish Rs. 200 billion in withholding tax on raw materials for the manufacturing sector is under review. Tax reductions on construction materials are also being discussed to support the real estate and infrastructure sectors.
Additionally, new loan schemes for small farmers are expected to be introduced to enhance agricultural productivity.
Sources confirm that these relief proposals were prepared under special directives from the Prime Minister and presented to the IMF during earlier rounds of talks. While the IMF has reacted positively to the tax relief suggestions, it has made it clear that the government must provide a comprehensive alternative revenue plan.
In last night’s round of virtual discussions, Pakistan’s economic team also briefed the IMF on potential new sources of income to compensate for the proposed tax cuts.
Today’s negotiations aim to finalize these proposals and align them with the IMF’s fiscal expectations ahead of the formal budget presentation.