Pakistan proposes reversal of tax relief for certain salaried individuals
FBR outlines revised tax slabs, minor Super Tax cuts, and PKR 701 billion in new revenue measures during Finance Bill review
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
The Pakistan government has proposed to reverse its decision to reduce income tax rates for salaried individuals earning between PKR 600,000 and PKR 1.2 million annually, a relief that was initially announced in the federal budget for the 2025–26 fiscal year. At the same time, it has raised the cash withdrawal threshold for non-filers from PKR 50,000 to PKR 75,000.
Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial made the announcement during a review of the Finance Bill (2025–26) at a National Assembly Standing Committee on Finance meeting held Friday at Parliament House.
Committee members were informed that the rollback was necessitated by fiscal constraints, especially in light of the recently approved 10% salary increase for government employees. According to the FBR, the reversal will help prevent a revenue loss of nearly PKR 56 billion from the salaried class.
Under the revised slabs, annual income between PKR 600,000 and PKR 1.2 million will now be taxed at 2.5%, up from 1%. Income from PKR 1.2 million to 2.2 million will be taxed at 11%, while earnings between PKR 2.2 million and 3.2 million will face a 23% rate.
Those earning PKR 3.2 million to 4.1 million annually will pay 30%, and individuals with income above PKR 4.1 million will remain in the top bracket of 35%.
Current taxpayer distribution shows that 431,206 individuals fall in the PKR 600,000–1.2 million bracket, 387,345 earn between PKR 1.2–2.2 million, 162,500 between PKR 2.2–3.2 million, 76,486 in the PKR 3.2–4.1 million range, and 158,905 above PKR 4.1 million. The total number of active income tax filers is 1.252 million.
The FBR chairman also noted that a slight reduction — by half a percentage point — in the Super Tax under Section 4C of the Income Tax Ordinance has been proposed for corporate income brackets ranging from PKR 200 million to PKR 500 million. This measure is intended to signal the government’s commitment to easing the tax burden on compliant corporate sectors. Overall, the Finance Bill 2025–26 includes new taxation measures expected to generate PKR 701 billion in revenue.
Other key highlights of the budget include the introduction of a 30% tax credit for purchasing flats or 10-marla homes. Registered businesses accepting cash sales above PKR 200,000 will face a PKR 30,000 penalty, while new amendments disallow the adjustment of rental income losses moving forward.
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