Deadline Alert
File Your Income Tax Return Before 30 September 2025 to Prevent FBR Penalties and Notices.
Deadline Alert
File Your Income Tax Return Before 30 September 2025 to Prevent FBR Penalties and Notices.
The federal budget for fiscal year 2025–2026 has delivered a glimmer of hope for Pakistan’s salaried individuals. With income tax relief measures announced under the Finance Act 2025–26, the government aims to ease the financial burden on low and middle-income earners while navigating the country’s broader economic challenges.
But how much of a difference will these changes really make?
In this post, we’ll break down the new income tax slabs, examine the proposed cuts, and explore what it all means for Pakistan’s working population.
Presented on June 10, 2025, by Finance Minister Muhammad Aurangzeb, the 2025–26 federal budget includes:
Revised tax slabs with reduced rates across income brackets
Up to 80% tax relief for those earning between Rs. 600,000 and Rs. 1.2 million annually
Limited relief (~3%) for high-income earners (Rs. 4.1 million and above)
10% pay raise for government employees
7% increase in government pensions
These reforms are part of a broader strategy to boost disposable income, improve tax compliance, and meet the Rs. 14.131 trillion tax revenue target for FY26.
Here’s a quick comparison of income tax before and after the budget, showing monthly and annual tax savings:
| Monthly Salary (PKR) | Annual Salary | Tax 2025 (Annual) | Tax 2026 (Annual) | Monthly Tax 2025 | Monthly Tax 2026 | Monthly Relief |
|---|---|---|---|---|---|---|
| 100,000 | 1,200,000 | 30,000 | 6,000 | 2,500 | 500 | 2,000 |
| 150,000 | 1,800,000 | 120,000 | 72,000 | 10,000 | 6,000 | 4,000 |
| 200,000 | 2,400,000 | 230,000 | 162,000 | 19,167 | 13,500 | 5,667 |
| 250,000 | 3,000,000 | 380,000 | 300,000 | 31,667 | 25,000 | 6,667 |
| 400,000 | 4,800,000 | 945,000 | 861,000 | 78,750 | 71,750 | 7,000 |
| 800,000 | 9,600,000 | 2,625,000 | 2,541,000 | 218,750 | 211,750 | 7,000 |
| 1,000,000 | 12,000,000 | 3,811,500 | 3,692,850 | 317,625 | 307,738 | 9,888 |
| 2,000,000 | 24,000,000 | 8,431,500 | 8,270,850 | 702,625 | 689,238 | 13,388 |
| 3,000,000 | 36,000,000 | 13,051,500 | 12,848,850 | 1,087,625 | 1,070,738 | 16,888 |
Income between Rs. 600,000 – Rs. 1.2 million: Tax rate reduced from 2.5% to 1%, providing up to 80% relief.
Income between Rs. 1.2 million – Rs. 4.1 million: Steady tax reductions tailored for middle-income groups.
Income above Rs. 4.1 million: Minimal impact with around 3% decrease, maintaining progressive tax structure.
These changes were endorsed by the National Assembly’s Standing Committee on Finance and approved under the Finance Act 2025–26.
While the relief has been welcomed, experts and institutions have voiced concerns:
The Policy Research and Advisory Council (PRAC) acknowledged positive steps for salaried individuals but highlighted the budget’s lack of support for the industrial sector, which could impact job creation and economic resilience.
Critics argue that without structural reforms in inflation control, employment, and investment, the relief might have limited real-world impact.
The revised tax structure for FY 2025–26 is a positive step toward easing the burden on Pakistan’s salaried workforce. It brings tangible financial relief—especially for low and middle-income earners—and attempts to boost confidence in the system.
But the long-term success will depend on effective implementation, macroeconomic stability, and continued reforms to promote job growth and investment.
Check your new tax bracket to calculate your reduced liability.
File your 2025–26 return on time to benefit from ATL inclusion.
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