ISLAMABAD: In a bid to ease financial pressure on the working population, Finance Minister Muhammad Aurangzeb on Tuesday announced income tax cuts for low- and middle-income salaried individuals as part of the federal budget for 2025-26.
Presenting the budget in the National Assembly, the finance minister said the government had reduced tax rates across all six income slabs for salaried persons. “This relief aims to help middle-income groups manage inflation and improve take-home pay,” he said.
According to the Finance Bill 2025, tax rates for individuals earning between Rs600,001 and Rs1.2 million have been lowered to 1% from 5%. Those earning Rs1.2 million to Rs2.2 million annually will now pay 11% instead of 15%, while their fixed tax component drops from Rs30,000 to Rs6,000. For the Rs2.2 million to Rs3.2 million income bracket, the rate is cut to 23% from 25%, with the fixed tax reduced to Rs116,000.
However, no change has been made for individuals earning above Rs3.2 million. The 30% and 35% tax rates remain, though fixed tax components have been slightly lowered.
Despite the relief, members of the salaried class expressed disappointment. Komal Ali of the Salaried Class Alliance of Pakistan (SCAP) said the cuts were “insignificant” and offset by higher taxes on investments like mutual funds and banking products. “The real issue remains unaddressed—wealthy sectors like agriculture and retail are still untaxed,” she said.
The government also maintained the tax exemption threshold at Rs600,000, ignoring SCAP’s demand to raise it to Rs1.2 million.
Salaried individuals paid over Rs550 billion in taxes during FY25, making them one of the most compliant taxpayer groups. However, critics argue that without broader tax reforms and net expansion, the burden on this segment remains unjust.
