Islamabad: In a significant development, the International Monetary Fund (IMF) has allowed Pakistan to reduce the income tax rate for the salaried class in the upcoming federal budget for the fiscal year 2025-26. The move is aimed at reducing the financial burden on the middle class while also maintaining the government’s fiscal discipline.
According to sources, the IMF has given in-principle approval to reduce tax rates at different income levels. In particular, for those whose annual income is between Rs 6 lakh and Rs 12 lakh, the tax rate has been proposed to be reduced from 5 percent to 1 percent, which will reduce their tax burden from Rs 30,000 to Rs 6,000. However, the IMF has proposed a median rate of 1.5 percent on this, which amounts to a tax of Rs 9,000.
A 2.5 percent reduction is also being discussed for the high-income group, and under this, the tax rate on the highest income bracket is expected to be reduced from 35 percent to 32.5 percent. These proposals will provide relief of Rs56 to 60 billion in the next fiscal year.
To meet the potential shortfall in tax revenue, the Federal Board of Revenue (FBR) is planning to raise revenue from other sources, including expanding the tax base and restructuring the existing surcharges or super tax. The FBR has to achieve a record collection target of Rs1.42 trillion next year.
Moreover, the government is also considering increasing the tax exemption limit for those with an annual income of Rs600,000 to Rs800,000 so as to provide further relief to the salaried class.
All these proposals show the government’s determination to adopt a balanced policy between economic reforms and public welfare. Final decisions will be presented in the upcoming budget details.
