PTBP Web Desk
The federal government is considering reducing the income tax burden on salaried individuals in the upcoming Budget 2026-27 as part of efforts to provide relief to one of the country’s largest taxpaying segments.
According to reports, Finance Minister Senator Muhammad Aurangzeb supports lowering income tax rates for salaried individuals and potentially increasing the taxable income threshold. The proposal aims to recognize the significant contribution of salaried taxpayers compared to sectors such as retail, wholesale, real estate, and exports.
Officials familiar with the discussions said the government may avoid increasing salaries and pensions in the upcoming budget. Instead, authorities are considering using the available fiscal space to provide tax relief through lower tax rates and revised income slabs.
The move is based on the argument that salary increases often push employees into higher tax brackets, reducing the actual benefit in take-home income. Policymakers believe reducing the tax burden may offer more effective financial relief for government employees and private sector workers.
Sources said the tax policy office and independent consultancy firms are currently preparing multiple proposals ahead of budget consultations with the International Monetary Fund (IMF), expected to begin on May 15.
The report also suggested that the federal development programme could face additional spending cuts as the government attempts to manage fiscal pressures and meet IMF-related targets.
Over the last four years, government salaries have increased by more than 60 percent, while many private sector employees have struggled with slow wage growth amid inflation and economic uncertainty.
Officials noted that the salaried class has become one of the biggest contributors to Pakistan’s tax revenue. During the first nine months of the current fiscal year, salaried individuals reportedly paid more than Rs. 425 billion in taxes. This amount exceeded contributions from the real estate sector and surpassed the combined tax collection from wholesalers, retailers, and exporters.
Despite their growing contribution, salaried households continue to face rising living expenses due to inflation, higher utility costs, and broader economic pressures.
However, officials clarified that salary increases already approved for employees working on Public Sector Development Programme (PSDP) projects will remain protected. The government had recently approved a 20 to 35 percent increase in minimum salaries for PSDP employees after a gap of four years.
The final decisions regarding salaries, pensions, tax relief, and development spending are expected after detailed discussions with the IMF during the budget process.
