Pakistan is considering key changes in its tax policy for the upcoming budget of fiscal year 2025-26. The Federal Board of Revenue (FBR) plans to increase the annual tax exemption limit for salaried individuals from Rs600,000 to possibly Rs1,000,000 or Rs1,200,000. These proposals come ahead of the International Monetary Fund (IMF) mission’s visit on May 16 to review Pakistan’s budget plans and economic targets.
At the same time, the government is also looking at bringing pensioners into the tax net. One proposal suggests taxing those who receive more than Rs100,000 monthly pension. The potential tax rates could range between 2% and 5%. However, officials admit that this idea might not pass all approval stages due to expected backlash.
The IMF has asked Pakistan to reduce exemptions and improve tax equality. Therefore, authorities are pushing for a fairer tax system by including high-income pensioners. The government may also propose lowering tax rates for the middle-income group, which currently contributes a large share of tax revenue. Additionally, a 10% surcharge on very high-income earners could be dropped.
Although these steps aim to widen the tax base, concerns remain about their impact on fixed-income groups. Policymakers must strike a balance between meeting IMF conditions and protecting ordinary citizens. Talks with various stakeholders are ongoing before finalizing the budget.
Meanwhile, suggestions are also being made to revise super tax rates and review other tax measures. The Senate Finance Committee recently met with trade groups to gather their feedback. As the budget deadline approaches, Pakistan will have to align its revenue strategy with both IMF expectations and public interest.