Monthly salary tax rates may drop in Federal Budget 2025-26

The federal government has made preparations to provide 2.5% relief in tax slabs for the salaried class in the budget for the upcoming fiscal year 2025-26. 

Federal Finance Minister Muhammad Aurangzeb, in an important meeting of the Federal Board of Revenue (FBR) chaired by the Prime Minister to review the expansion of the tax scope and increase in tax revenue, has also indicated that various options and proposals are being reviewed to provide tax relief to the salaried class in the next budget.

FBR sources said that relief will be given to all slabs of the salaried class in the next fiscal year’s budget, and a review is being done to reduce the income tax rate by 2.5 percent for the corporate sector as well.

Sources said that the income tax rate on a monthly salary of Rs 100,000 may be reduced from 5 percent to 2.5 percent.

FBR sources further said that income tax on a monthly salary of Rs 183,000 may be reduced from 15% to 12.5%, income tax on a monthly salary of Rs 267,000 may be reduced from 25% to 22.5%, and income tax on a monthly salary of Rs 333,000 is likely to be 27.5% instead of 30%. Similarly, income tax on a monthly salary of more than Rs 333,000 will be reduced by 2.5% to 32.5%.

Sources further said that withholding tax relief of Rs200 billion can be given on imported raw materials for industries.

The federal government’s proposed tax relief will be conditional on the permission of the International Monetary Fund (IMF), and the budget for the new fiscal year will be presented on June 2 or 3, 2025.