The federal government of Pakistan has proposed significant reductions in income tax rates for salaried individuals in the Budget 2025-26, Finance Minister Muhammad Aurangzeb announced during his budget speech at the National Assembly on Tuesday.
Under the new proposals, individuals earning between Rs600,000 and Rs1.2 million annually will benefit the most, with the tax rate reduced from five percent to just one percent. This change means that taxpayers with an income of Rs1.2 million will pay Rs6,000 in taxes instead of the previous Rs30,000.
Furthermore, the government plans to cut the income tax rate from 15 percent to 11 percent for those earning up to Rs2.2 million per year. Similar reductions are also planned for higher income brackets.
The finance minister explained that these measures aim to align salaries with inflation and provide much-needed relief to Pakistan’s salaried class. “The government recognises that Pakistan’s top talent faces some of the highest taxes in the region. We want to give them a reason to stay,” Aurangzeb said while presenting the budget for the fiscal year 2025-26.