Budget 2025-26: Income Tax Reforms Provide Relief for Salaried Class
The **federal budget 2025-26** introduces important tax changes, particularly for the salaried class in Pakistan. From July 1, 2025, the **new income tax slabs** aim to provide tax relief for individuals whose annual taxable income exceeds Rs. 600,000. According to high-level sources, this reformation will ensure a more equitable tax burden across different income groups. Read More
In the **new budget 2025-26**, individuals with taxable income between Rs. 600,000 and Rs. 1,200,000 will be taxed at a 1% rate on the amount exceeding Rs. 600,000. For those with income up to Rs. 600,000, the tax rate remains unchanged at 0%, ensuring that lower-income segments are not burdened with additional taxes. Additionally, for individuals earning between Rs. 1,200,000 and Rs. 2,200,000, the tax rate has been reduced to 11%, calculated on the amount exceeding Rs. 1,200,000.
Detailed Breakdown of Income Tax Slabs for 2025-26
The following table outlines the revised income tax slabs for the salaried class under the **federal budget 2025-26**:
| Sr # | Taxable Income | Rate of Tax |
|---|---|---|
| 1. | Where taxable income does not exceed Rs. 600,000 | 0% |
| 2. | Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 | 1% of the amount exceeding Rs. 600,000 |
| 3. | Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,200,000 | Rs. 6,000 + 11% of the amount exceeding Rs. 1,200,000 |
| 4. | Where taxable income exceeds Rs. 2,200,000 but does not exceed Rs. 3,200,000 | Rs. 116,000 + 23% of the amount exceeding Rs. 2,200,000 |
| 5. | Where taxable income exceeds Rs. 3,200,000 but does not exceed Rs. 4,100,000 | Rs. 346,000 + 30% of the amount exceeding Rs. 3,200,000 |
| 6. | Where taxable income exceeds Rs. 4,100,000 | Rs. 616,000 + 35% of the amount exceeding Rs. 4,100,000 |
Impact of the Budget on Salaried Individuals
The **2025-26 federal budget** introduces significant changes aimed at providing relief for salaried individuals in Pakistan. By reducing tax rates for income brackets like Rs. 600,000 to Rs. 1,200,000 and Rs. 1,200,000 to Rs. 2,200,000, the government hopes to alleviate the financial pressure on middle-income earners. The **tax exemption** for individuals earning up to Rs. 600,000 remains unchanged, which ensures the lower-income group is protected from higher tax burdens.
Tax Implications for Higher Income Groups
While middle and lower-income groups benefit from these reforms, higher-income individuals will still face a higher tax burden. With the top tax rate set at **35%** for income exceeding Rs. 4,100,000, individuals in higher income brackets will continue to contribute a substantial share to the national tax pool. These measures are designed to maintain balance between revenue generation and providing relief to the average taxpayer.
Looking Forward: Potential Future Reforms
The **2025-26 income tax reforms** may pave the way for more changes in future budgets. It is crucial for taxpayers to stay informed about upcoming adjustments and continue to adapt to new **income tax slabs** as the government works towards creating a more fair and progressive tax structure. As tax reforms continue, it will be important to monitor how these changes impact the salaried class over time.
The tax reforms introduced in the **federal budget 2025-26** provide a much-needed reprieve for salaried individuals in Pakistan, particularly those in the middle-income brackets. However, a careful balance must be struck to ensure the tax system remains equitable while maintaining national revenue generation.