New Income Tax
In a significant move aimed at restructuring the tax regime, the federal government has introduced revised income tax slabs for the salaried class as part of the Finance Bill 2025-26.
The bill, passed by a majority vote in the National Assembly on Thursday, aims to offer financial relief to low-income earners while placing a heavier tax burden on high-earning professionals and affluent pensioners.
Under the revised tax structure, individuals earning up to Rs600,000 annually will continue to enjoy full exemption from income tax. For those earning above this threshold, the new system introduces a series of progressive tax brackets, with rates escalating in line with income levels.
Revised Income Tax Slabs for Salaried Individuals:
- Annual income up to Rs600,000
➤ Tax rate: 0% (fully exempt) - Income from Rs600,001 to Rs1,200,000
➤ Tax rate: 1% on the amount exceeding Rs600,000 - Income from Rs1,200,001 to Rs2,200,000
➤ Fixed tax: Rs6,000
➤ Plus: 11% on the amount exceeding Rs1.2 million - Income from Rs2,200,001 to Rs3,200,000
➤ Fixed tax: Rs116,000
➤ Plus: 23% on the amount exceeding Rs2.2 million - Income from Rs3,200,001 to Rs4,100,000
➤ Fixed tax: Rs346,000
➤ Plus: 30% on the amount exceeding Rs3.2 million - Income above Rs4,100,000
➤ Fixed tax: Rs616,000
➤ Plus: 35% on the amount exceeding Rs4.1 million
In a landmark development, the Finance Bill also introduces a tax on high-value pension incomes for the first time. Pensioners receiving over Rs10 million annually will be subject to a 5% income tax, while those earning below this amount will remain exempt.
The government justifies this measure as an effort to increase equity in the tax system by including affluent retirees in the tax net while protecting average pensioners from any financial burden.
The Finance Bill 2025-26 was approved during an ongoing session of the National Assembly, chaired by Speaker Sardar Ayaz Sadiq. All clauses of the bill were passed through majority vote, while opposition-proposed cut motions were overwhelmingly rejected. Following the approval, the session was adjourned until 11:00 a.m. the next day.
This fiscal move is seen as a key component of the government’s broader strategy to enhance revenue collection while ensuring that economic relief reaches the most vulnerable segments of society.
