FBR Reverses Tax Relief for Low-Income Earners in Finance Bill 2025

ISLAMABAD – June 16, 2025: The Federal Board of Revenue (FBR) has reversed the earlier-proposed tax relief for low-income salaried individuals, according to updates shared during a session of the National Assembly’s Standing Committee on Finance and Revenue.

During the session, lawmakers discussed the confusion over tax rates for individuals earning between Rs600,001 and Rs1.2 million annually. While Finance Minister Muhammad Aurangzeb had announced a 1% income tax for this bracket in his budget speech, the Finance Bill 2025 mentioned a 2.5% tax rate.

FBR Chairman Rashid Mahmood Langrial clarified the issue by stating that the federal cabinet had decided to cancel the proposed tax relief, bringing the higher tax rate back into effect.

Government Justifies Tax Policy Reversal

Minister of State for Finance Bilal Azhar Kayani defended the decision, saying it was made after updating salary projections. The government had initially planned a 6% salary increase for public employees, but it was later revised to 10%, which officials claim offsets the tax increase.

However, this explanation did not satisfy several committee members. They argued that the salary hike only benefits government employees, while the private sector—which forms a large part of the low-income group—will not get any relief.

Committee Chairman Naveed Qamar expressed concern over the financial burden being placed on private sector workers. He criticized the decision for being unfair to non-government salaried individuals, many of whom are already struggling with inflation and low wages.

Higher Cash Withdrawal Limit for Non-Filers Approved

Separately, the committee also approved an increase in the cash withdrawal limit for non-filers. The new limit is Rs75,000, up from Rs50,000, after which withholding tax will apply.

Mr. Qamar had initially suggested raising the limit to Rs100,000, but the FBR and committee settled on Rs75,000 as a middle ground. The aim is to maintain tax enforcement while ensuring public convenience.