ISLAMABAD – A sigh of relief for Pakistan’s salaried class, as Federal Board of Revenue (FBR) proposed reduction in income tax rates for the upcoming fiscal year 2025–26 amid ongoing negotiations with the International Monetary Fund (IMF) ahead of the federal budget to be presented on June 10.
Under FBR’s proposal, the first income slab for those earning between Rs6Lac and Rs12Lac annually, may see their tax rate cut from 5pc to just 1pc. This means individuals in this category would pay only Rs 6,000 to Rs 12,000 per year in taxes, down from Rs 30,000 to Rs 60,000, depending on their income level.
IMF also responded by suggesting compromise at 1.5pc, which would still mean a significant tax reduction and lower financial pressure on low- to middle-income earners. If implemented, individuals in this bracket would pay up to Rs 9,000 annually.
For higher-income brackets, the apex tax collection authority proposed a 2.5pc reduction in tax rates across multiple salary slabs, and a cut in the maximum tax rate from 35% to 32.5%. These reductions aim to ease the burden on professionals and stimulate consumer spending.
Officials admit that the full fiscal impact of these tax adjustments has not yet been finalized. FBR is under pressure to propose compensatory measures to offset an estimated Rs 56–60 billion in lost revenue resulting from these tax concessions.
With revenue target of Rs 14.2 trillion for the next fiscal year and current shortfalls in collections, balancing tax relief with revenue requirements remains a key challenge.
If agreed upon, these changes will mark a significant policy shift aimed at supporting the middle class amid persistent inflation and rising living costs.
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