With the arrival of the International Monetary Fund (IMF) delegation just days away, the government of Pakistan is actively reviewing key budget proposals, including a major new measure to tax high-income pensioners.
According to official sources, the IMF has recommended that income tax be imposed on individuals receiving large monthly pensions, as part of efforts to broaden the tax base and enhance fiscal discipline. In response, the federal government is preparing to introduce a 2.5% income tax on monthly pensions of Rs400,000 or more in the upcoming Budget 2025-26.
Retired officials, judges, military personnel to be included
The proposed tax is expected to target high-income retired individuals, including former civil servants, military officers, and judges, including those from the judiciary.
Simultaneously, the government is working on income tax relief measures for small employees and middle-salaried groups. One key proposal under review is to increase the minimum annual income tax exemption limit, currently set at Rs600,000, to an unspecified higher threshold.
IMF team due in Pakistan on May 14
The IMF team is scheduled to visit Islamabad on May 14 to finalize Pakistan’s budget targets for FY2025–26. The government is keen to strike a balance between fulfilling IMF conditions and offering relief to its citizens in a tough economic environment.
Sources within the Federal Board of Revenue (FBR) confirm that discussions are ongoing to fine-tune these proposals before the IMF delegation’s arrival.
