Government Considering Tax Relief for Salaried Class in New Budget, No Major Salary Increase Likely for Public Employees

Islamabad: The Pakistani government is reportedly considering reducing the income tax burden on the salaried class in the upcoming federal budget, while a major increase in salaries and pensions for government employees appears unlikely.
According to a report published by Dawn, the Finance Ministry is working on proposals aimed at providing relief to salaried individuals through lower tax rates and higher tax exemption thresholds.
The report stated that Finance Minister Muhammad Aurangzeb wants to reduce tax rates as much as possible so that both private and public sector employees can benefit.
Officials believe that instead of increasing salaries, reducing taxes could leave government employees in a financially better position. The report noted that salary increases often push employees into higher tax brackets, resulting in little improvement in their actual take-home pay.
According to official data cited in the report, the salaried class paid more than Rs425 billion in taxes during the first nine months of the current fiscal year — more than double the Rs200 billion collected from the real estate sector.
The report further highlighted that government employees’ salaries have increased by over 60 percent during the past four years, while wages in the private sector have largely remained stagnant despite inflation. Authorities therefore see tax relief as a comparatively fairer solution.
The Finance Ministry is expected to discuss these proposals with a delegation from the International Monetary Fund (IMF) during budget consultations beginning on May 15.
Officials said that last year’s increase in salaries and pensions created an additional burden of Rs170 billion on the national treasury. They believe that using part of this amount for tax reductions could provide broader relief to middle-income earners.
However, employees working on development projects under the Public Sector Development Programme (PSDP) will continue to receive previously approved salary increases ranging from 20 to 35 percent, effective from July 1, 2026.
The final decision regarding salary hikes for other government employees is expected after negotiations with the IMF, during which budget cuts and tax relief measures will also be discussed.