In a move to ease the financial burden on Pakistan’s salaried class, the federal government has announced substantial tax relief measures in the Federal Budget 2025-26, as detailed in the budget speech.

The new budget reduces tax rates across all income slabs for salaried individuals, aiming to provide much-needed financial respite amid economic challenges.

The budget introduces a revised tax structure for salaried individuals, significantly lowering tax rates and amounts across various income brackets:

Income between Rs600,000 and Rs1.2 million: The tax rate has been set at 1%, with the tax liability on an income of Rs1.2 million reduced from Rs30,000 to Rs6,000.
Income between Rs1.2 million and Rs2.2 million: The 15% tax rate imposed on annual income between Rs1.2 million and Rs2.2 million has been reduced by 4%. The new tax is set at 11%.
This means, an employee earning up to Rs 2.2 million, who used to pay a maximum of Rs330,000 annually in tax, will now pay Rs242,000.
Income between Rs2.2 million and Rs3.2 million: The tax rate has been lowered from 25% to 23%, providing relief to higher-earning salaried individuals.
An employee earning up to Rs2.2 million, whose maximum tax was previously Rs550,000 per year, will now have Rs506,000 deducted annually.

These reductions across all tax slabs reflect the government’s commitment to supporting the salaried class, which has faced significant economic pressures due to inflation and rising living costs.