Pakistan Proposes 10% Income Tax Cut for Salaried Class in Upcoming Budget
Relief worth Rs. 50 billion pending IMF approval as talks begin this week
Key Highlights
Tax Reduction: Federal government proposes up to 10% cut across income tax slabs for salaried individuals.
IMF Dependency: Final approval subject to ongoing IMF negotiations (May 14–22, 2025).
Projected Relief: Expected to benefit taxpayers by Rs. 50 billion in FY2025-26.
Why This Matters
✅ Increased Take-Home Pay: Lower tax burden to boost disposable income for middle-class households.
✅ Economic Stimulus: Higher spending power may drive growth in retail and services sectors.
✅ IMF Alignment: Part of Pakistan’s broader fiscal reforms to stabilize the economy.
Proposed Tax Slab Adjustments
| Current Tax Rate | Potential New Rate | Income Bracket (Annual) |
|---|---|---|
| 5% | 3–4.5% | Up to Rs. 600,000 |
| 15–25% | 10–20% | Rs. 600,001 – Rs. 2 million |
| 30–35% | 25–30% | Above Rs. 2 million |
Example: A taxpayer earning Rs. 1.5 million/year could save ~Rs. 30,000 annually.
IMF Negotiations: Key Considerations
Conditions: Pakistan may need to commit to:
Reducing energy subsidies
Expanding the tax net (e.g., documenting informal sectors)
Precedent: Similar relief in 2024 was tied to IMF-mandated reforms.
Public & Expert Reactions
Salaried Class: Welcomes the move amid high inflation.
Economists: Caution that sustainable growth requires broader reforms like curbing circular debt.
What’s Next?
IMF Talks Outcome: Expected by late May 2025.
Budget Approval: Final announcement in June 2025.
