ISLAMABAD: The federal government has proposed a 10% increase in salaries for government employees in the 2025–26 budget, alongside a pension hike between 7.5% and 10%, according to official budget proposals.
However, hopes for substantial tax relief for salaried individuals may go unfulfilled, as the International Monetary Fund (IMF) has reportedly opposed retaining the current Rs1.2 million annual tax-free income threshold. In response, the government is considering slashing the exemption limit to Rs600,000 and imposing a minimum 1% income tax on individuals earning Rs1.2 million annually.
A general income tax reduction of 2.5% across all income slabs is under discussion, but a final decision is still pending. On the corporate side, the government is also weighing the possibility of setting the corporate income tax rate at 2.5%, as part of broader efforts to expand the tax net and meet fiscal benchmarks under the IMF programme.
The federal cabinet, chaired by Prime Minister Shehbaz Sharif, is scheduled to convene today at 4 PM to review and approve the budget proposals ahead of their formal presentation in Parliament.
Finance Minister Muhammad Aurangzeb will present the Federal Budget 2025–26 in the National Assembly, followed by the tabling of the Finance Bill 2025 in the Senate.
The budget comes amid growing economic pressure and ongoing negotiations with the IMF, with fiscal reforms and tax restructuring taking center stage in efforts to stabilize the economy.
