ISLAMABAD: The Federal Board of Revenue (FBR) is working on two significant budget proposals for the fiscal year 2025-26 — introducing a nominal tax on high-value pensions and increasing the income tax exemption threshold to provide relief to low-income groups.
Sources confirmed that both proposals are currently being developed and will soon be submitted to Prime Minister Shehbaz Sharif for final approval. The aim is to generate additional revenue from elite segments while easing the tax burden on the general public.
The first proposal focuses on taxing pensioners who receive exceptionally large monthly pensions, particularly retired Grade-22 officers and other top-tier officials. Under the draft proposal, pensions of Rs400,000 per month or Rs4.8 million annually could be subject to a nominal tax — potentially around 2.5%.
Officials clarified that the plan targets a very narrow group of high-income pensioners, many of whom lead lavish lifestyles while continuing to benefit from generous state-funded pensions. The majority of pensioners receiving modest sums would remain unaffected.
A former FBR Member Tax Policy remarked that the proposed tax would be politically sensitive, as it may impact retired members of the judiciary, senior civil servants, and military officials. The decision to proceed will ultimately rest with the political leadership.
The second proposal seeks to raise the current income tax exemption threshold, which stands at Rs600,000 per year. If approved, this would offer substantial relief to salaried individuals and low-income earners, many of whom are struggling with high inflation and increased living costs.
The FBR believes the proposed adjustments can help balance fiscal needs with social equity, especially amid projections of a challenging budget year with limited scope for general sales tax relief.
Final approval and implementation of these proposals will depend on further review and the government's broader budgetary strategy for 2025-26.
