ISLAMABAD – The federal government is likely to unveil the budget for next fiscal year 2025-26 in early June with all employees expecting a significant increase in their salaries and pensions.
In previous budget 2024-25, the PML-N government had rolled out the budget with the total outlay of Rs18,877 billion with major focus on fiscal consolidation.
The budget envisaged 25 percent increase in the salaries of government employees from Grade-1 to 16 and 20% from Grade-17 to 22. Fifteen percent raise has been given in the pension of retired government employees.
What’s expected about salaries in Budget 2025-26?
As the government has paced up efforts to finalise the budget for upcoming fiscal year, it is considering various proposal regarding an increase in salaries of the government employees.
Reports claimed that the government would announce the 25% increase in salaries for employees from Grade 1 to 16 and 20% from Grade 17-22.
However, there is no official statement in this regard as the final decision will be rolled out on the budget day.
Expected Tax Slabs after Budget 2025
Sigh of relief for Pakistanis as a 2.5 percent reduction in income tax rates is on the cards in the upcoming Budget 2025–26, as the salaried class is bearing the brunt of massive taxes.
This proposed cut comes as part of broader tax reforms being finalized ahead of budget presentation. The move aims to ease financial burden on Pakistan’s salaried class, which consistently contributed share to the national tax revenue.
Sources familiar with development revealed the government is working to revise income tax slabs by cutting tax rate by 2.5 percent across each higher bracket, without changing existing fixed tax thresholds. The highest slab, would drop to 32.5%, while other slabs would see similar proportional reductions.
Proposed Income Tax Brackets (Post 2.5% Rate Reduction)
| Annual Income (PKR) | Current Tax | Proposed Tax |
|---|---|---|
| Up to 600,000 | No tax | No tax |
| 600,001 – 1,200,000 | 5% of the amount exceeding Rs600,000 | 2.5% of the amount exceeding Rs600,000 |
| 1,200,001 – 2,200,000 | Rs30,000 + 15% of the amount exceeding Rs1,200,000 | Rs30,000 + 12.5% of the amount exceeding Rs1,200,000 |
| 2,200,001 – 3,200,000 | Rs180,000 + 25% of the amount exceeding Rs2,200,000 | Rs180,000 + 22.5% of the amount exceeding Rs2,200,000 |
| 3,200,001 – 4,100,000 | Rs430,000 + 30% of the amount exceeding Rs3,200,000 | Rs430,000 + 27.5% of the amount exceeding Rs3,200,000 |
| Above 4,100,000 | Rs700,000 + 35% of the amount exceeding Rs4,100,000 | Rs700,000 + 32.5% of the amount exceeding Rs4,100,000 |
The relief is being considered as salaried individuals are bearing brunt amid soaring taxes.
Furthermore, Pakistani government is also considering surge in the income tax exemption threshold, potentially increasing it from Rs6lac to Rs1 million. This would exempt more low-income earners from tax entirely.
Officials emphasized that despite these relief efforts, the government aims to keep the overall revenue impact neutral by balancing tax cuts with other proposed revenue measures and reductions in corporate and withholding tax rates.
Budget 2025-26: Tax relief for those earning up to Rs 1 Lac per month on cards
