Income Tax Slabs 2025 – 2026: A Comprehensive Review
Pakistan’s Federal Budget 2025–2026 has introduced significant changes to income tax slabs in a bid to provide tax relief for salaried individuals. These revisions, under the Finance Act 2025, aim to ease financial pressure on low and middle-income earners amid rising inflation and economic challenges. While the reforms offer clear benefits for many, questions remain about their broader impact.
Income Tax Relief Highlights – Budget 2025–2026
Presented by Finance Minister Muhammad Aurangzeb on June 10, 2025, the federal budget emphasized long-awaited support for salaried individuals. With a history of bearing the country’s tax burden, Pakistan’s working class now sees a glimmer of hope through reduced income tax rates and revised slabs.
As per the new tax policy, earners between Rs. 600,000 to Rs. 1.2 million annually will enjoy tax cuts of up to 80%, significantly easing the load on low-income segments. Meanwhile, those earning above Rs. 4.1 million will see only minimal relief of around 3%.
- 4% tax cut for salaried and middle-income groups
- 10% salary increase for government employees
- 7% pension raise
- Rs. 14.131 trillion tax revenue target for FY26
Updated Income Tax Slabs 2025–2026 (Salaried Individuals)
Below is a simplified table showing how the monthly tax burden has decreased across different salary brackets under the new slabs:
| Monthly Salary (PKR) | Annual Salary | Tax 2025 (PKR) | Tax 2026 (PKR) | Monthly Tax Decrease |
|---|---|---|---|---|
| 100,000 | 1,200,000 | 30,000 | 6,000 | –2,000 |
| 150,000 | 1,800,000 | 120,000 | 72,000 | –4,000 |
| 200,000 | 2,400,000 | 230,000 | 162,000 | –5,667 |
| 300,000 | 3,600,000 | 550,000 | 466,000 | –7,000 |
| 500,000 | 6,000,000 | 1,365,000 | 1,281,000 | –7,000 |
| 1,000,000 | 12,000,000 | 3,811,500 | 3,692,850 | –9,888 |
| 2,000,000 | 24,000,000 | 8,431,500 | 8,270,850 | –13,388 |
Tip: You can use an updated Income Tax Calculator Pakistan 2025 to estimate your tax liabilities.
Who Benefits the Most?
- Low-Income Earners (Rs. 600,000 – Rs. 1.2 million): Tax rate cut from 2.5% to just 1%, offering up to 80% relief.
- Middle-Income Earners (Rs. 1.2 million – Rs. 4.1 million): Progressive cuts help improve disposable income.
- High-Income Earners (Above Rs. 4.1 million): Minor relief of around 3% to maintain tax contributions.
This new structure reflects a more progressive taxation model in Pakistan, targeting relief where it’s needed most.
Criticism & Concerns: A Mixed Response
Despite the good news, the federal budget drew mixed reactions:
- The Policy Research and Advisory Council (PRAC) appreciated tax relief but warned that failure to support the industrial sector could affect job growth.
- Some experts question whether the relief will truly improve take-home income amid rising inflation in Pakistan.
- Concerns remain about tax enforcement and whether the government can meet its ambitious revenue goals.
Conclusion: Hopeful Progress, but Caution Ahead
The revised Income Tax Slabs 2025–2026 in Pakistan are a positive step for the salaried class. With meaningful cuts for lower-income groups and modest changes for higher earners, the plan aims to increase financial stability and encourage economic activity.
However, the true impact will depend on how effectively these measures are implemented and how the economy performs in FY26.
For expert tax advice or legal guidance, feel free to contact us or visit our About Us page to learn more about our legal services in Pakistan.
