With the federal budget for the fiscal year 2025–26 expected to be presented in the first week of June, the government is considering a set of proposals to offer long-awaited tax relief to the salaried class.
According to senior officials in the Ministry of Finance, consultations are currently underway to hold a pre-Eid budget session, considering the Eid-ul-Adha holidays that may fall in the second week of June. The government is aiming to present the budget before June 5, with the approval process expected to begin shortly after Eid.
Sources added that the Federal Board of Revenue (FBR) has finalised three proposals specifically targeting tax relief for salaried individuals. Among the most prominent is a proposal to increase the monthly income threshold for tax exemption to Rs50,000, which translates to Rs600,000 annually. This would provide much-needed relief to low-income earners who are currently subject to taxation starting from the same amount.
However, this relief would not be an outright increase in exemption. Instead, the FBR is reportedly mulling a restructuring of the current tax slabs — a move aimed at shifting a larger portion of the salaried workforce into lower tax brackets. Additionally, there are discussions on simplifying tax return filing procedures to promote compliance and reduce the burden on middle-income taxpayers.
“The intention is to provide breathing room to the salaried class that has consistently borne the brunt of indirect taxes and inflation,” a senior tax official familiar with the budget-making process told Dawn.
IMF’s role crucial in final decision
While these proposals have been internally approved by the FBR, their implementation hinges entirely on the green light from the International Monetary Fund (IMF). Pakistan remains under an IMF programme that emphasizes fiscal consolidation, enhanced revenue mobilisation, and broadening the tax base.
An IMF mission is expected to arrive in Pakistan in the second week of May for detailed consultations on the upcoming budget. The Fund’s feedback will play a pivotal role in shaping not only the relief measures but also broader fiscal policy directions.
Officials acknowledge that while there is political will to offer relief, the government’s fiscal space remains constrained. The IMF is likely to scrutinise any tax exemptions that could impact revenue targets.
“We are cautiously optimistic,” a Finance Ministry official said. “The challenge is to strike a balance between relief and revenue generation without breaching IMF conditionalities.”
Proposed relief package for salaried class
According to sources, the relief plan includes:
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Raising the tax-free income ceiling to Rs50,000 per month (Rs600,000 per year).
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Revamping tax slabs to shift more individuals into lower tax categories.
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Simplifying tax return filing, potentially introducing pre-filled return options for salaried employees.
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Consideration of cost-of-living adjustments in line with inflation.
At present, any individual earning above Rs600,000 annually is liable to pay income tax, even at the lowest slab rate. This policy has long been criticised for disproportionately impacting the salaried class, which lacks the means to evade taxes — unlike sectors operating in the informal economy.
The FBR’s internal assessments have highlighted that salaried individuals remain among the most compliant taxpayer groups, yet they have seen little to no tax relief in recent years.
Political and economic considerations
With general elections expected in the next fiscal year, the ruling coalition is also keen to regain public support through a populist yet economically sustainable budget. Any meaningful relief for salaried workers could serve as a cornerstone of that effort.
That said, economic managers are also wary of the broader macroeconomic indicators, including Pakistan’s fiscal deficit, inflationary pressures, and a narrow tax base. Revenue collection for the current fiscal year has fallen short of expectations, and any tax cuts must be offset by higher compliance or new sources of revenue.
Insiders say that broadening the tax net, especially in untaxed sectors such as retail and agriculture, will be part of the broader strategy to create room for offering relief to compliant taxpayers.
Timeline and next steps
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May 2025 (Second Week): Arrival of IMF mission for budget consultations.
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By June 5: Tentative date for budget presentation, possibly before Eid-ul-Adha.
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Post-Eid: Parliamentary debate and budget approval process.
While the salaried class awaits official announcements, hopes are high that the upcoming budget will finally address long-standing grievances related to direct taxation.
“Even modest relief would be welcome,” said Muneeba Abbas, a private school teacher in Lahore. “What matters is the recognition that the salaried class deserves protection in tough times.”
Whether these proposals materialise or are revised in the face of IMF demands will become clear in the coming weeks — but the groundwork has already been laid.
