Pakistan government mulls relief for salaried class

As government officials hold discussions on the budget for the upcoming fiscal year 2025-26 (FY26) in Islamabad, they are also considering providing relief to the salaried class and removing the federal excise duty on property transactions to bring more people into the tax net.

Currently, anyone earning PKR 600,000 per year or above has to pay income tax. However, officials close to the Ministry of Finance told Nukta that the government was considering raising this threshold to PKR 700,000 or PKR 800,000 per year.

Pakistan's annual tax exemption threshold stands significantly lower than comparable figures in neighboring countries. According to data shared with Nukta, the equivalent tax exemption thresholds in India, Vietnam, Nepal, and Bangladesh are PKR 2.34 million, PKR 1.57 million, PKR 1.05 million, and PKR 890,000 respectively.

Another option that is being considered is the revision of the first three tax slabs of salaried class while no incentive would be allowed for higher slabs.

Tax collection from the salaried segment surged from PKR 76 billion in FY19 to an estimated PKR 570 billion in FY25.

Another tax relief under consideration is the abolition of 3% federal excise duty on real estate.

The duty had been imposed effectively on every house, plot, and apartment in Pakistan sold after June 30 last year. The levy had been introduced at the time of the budget's approval by the National Assembly.

It applied to commercial properties and the first sale of residential plots or properties, with rates of 3% for filers, 5% for late filers, and 7% for non-filers, collected at the time of booking, allotment, or transfer.

However sources revealed that all this would only be announced for the new fiscal year after getting approval from the International Monetary Fund.