Government weighs relief for salaried class amidst IMF consultations
Key Takeaways:
i) The Pakistani government is considering raising the annual income tax exemption limit from Rs600,000 to Rs800,000, pending IMF approval.
ii) A separate relief package is being evaluated for salaried individuals earning between Rs600,000 and Rs1.2 million annually.
iii) Pensions exceeding Rs800,000 annually may be taxed at rates ranging from 5% to 20%, depending on the amount.
Islamabad, Pakistan – April 17, 2025 – The Pakistani government is exploring potential changes to the income tax structure, including an increase in the annual tax exemption limit and the introduction of taxes on high pensions, according to sources within the Federal Board of Revenue (FBR).
The FBR is currently reviewing proposals to ease the tax burden on the salaried class for the upcoming fiscal year 2025-26. A key consideration is raising the annual income tax exemption limit from the current Rs600,000 to Rs800,000. This measure, however, is contingent upon approval from the International Monetary Fund (IMF), with whom the government is engaged in ongoing consultations.
In addition to the general exemption limit, the government is also evaluating a specific relief package targeted at salaried individuals earning between Rs600,000 and Rs1.2 million per year. The details of this package are still under review.
In addition to the general exemption limit, the government is also evaluating a specific relief package targeted at salaried individuals earning between Rs600,000 and Rs1.2 million per year.
A significant new proposal under consideration involves the taxation of high pensions. Under this plan, pensioners with annual pensions exceeding Rs800,000 could face tax rates ranging from 5% to 20%, depending on the pension amount. For instance, pensions around Rs800,000 might be taxed at 5%, while higher pensions could face rates of 10%, 12%, 15%, or even 20% for those exceeding Rs3 million annually.
It’s crucial to note that all these proposals are preliminary and subject to further review and consultation, particularly in coordination with the IMF.
