Salaried individuals across Pakistan are unlikely to receive significant tax relief in the upcoming federal budget for the fiscal year 2025-26, sources suggest. The budget, slated for presentation in the first week of June 2025, appears to prioritize revenue generation over easing the financial burden on the salaried segment, largely due to a substantial surge in tax collection from this group.
Provisional data for the first eight months of the current fiscal year (July 2024 to February 2025) reveals that the salaried class has already contributed a significant Rs 331 billion in income tax. This marks a substantial increase of nearly 57% compared to the Rs 211 billion collected during the same period in the previous fiscal year. The Federal Board of Revenue (FBR) anticipates an additional Rs 75 billion from this sector by the end of the current fiscal year, with total collections already exceeding Rs 120 billion.
While a recent media report quoted FBR Spokesperson Dr. Najeeb Memon stating that the government would review the taxation structure for the salaried class during the upcoming budget formulation, no firm commitments regarding potential tax relief have been made. This cautious approach has dampened hopes for respite among salaried taxpayers.
In the last fiscal year, the salaried class collectively paid a hefty Rs 368 billion in taxes. Despite this significant contribution and the fact that their income is taxed at the gross level without allowances for expenses, they did not receive any tax concessions. The government’s apparent reluctance to address this issue was further highlighted by its silence on the matter during recent discussions with the International Monetary Fund (IMF).
A major point of contention for the salaried class remains the increased tax burden imposed in the previous budget. The government’s decision to reduce the number of tax slabs disproportionately impacted middle- and upper-middle-income earners. Currently, the maximum tax rate of 35% applies to individuals earning Rs 500,000 per month, with an additional 10% surcharge pushing the effective tax rate to a staggering 38.5% for the highest income brackets.
An analysis of the contributions from different segments within the salaried class further underscores their significant role in tax revenue. Non-corporate sector employees contributed Rs 141 billion this year, showing a 43% increase. Corporate sector employees paid Rs 101 billion, a rise of 56%. Provincial government employees witnessed the most significant jump, contributing Rs 57 billion, a 96% increase, while federal government employees contributed Rs 34 billion, marking a 66% rise.
Given the current fiscal landscape and the impressive growth in tax revenue from the salaried class, the government appears unlikely to introduce any substantial measures to ease their tax burden in the upcoming budget. This news will likely be met with disappointment by a large segment of the Pakistani workforce who have been advocating for tax relief for some time.
