ISLAMABAD – In a significant breakthrough, the International Monetary Fund (IMF) has agreed to two key demands from Pakistan: increasing the defence budget and providing tax relief to the salaried class, according to official sources.
The government successfully convinced the IMF that rising national security needs could not be delayed. As a result, the IMF accepted Pakistan’s defence priorities and approved an increase in the upcoming fiscal year’s defence budget.
At the same time, salaried individuals are set to benefit from lower tax rates across all income slabs. The IMF has agreed to raise the annual tax-free income threshold from Rs600,000 to nearly Rs1 million, increasing monthly tax-free income from Rs50,000 to Rs83,000.
For example, someone earning Rs100,000 per month will now pay just 2.5% tax instead of 5%. Similarly, those earning Rs183,000 may see a tax cut from 15% to 12.5%, while higher salary brackets will also enjoy a 2.5% reduction in tax rates. Finance Minister Muhammad Aurangzeb had earlier promised full support for the armed forces in the budget, calling it a national necessity. Meanwhile, Section 129 of the Income Tax Act will be updated to reflect the new relief measures for salaried citizens.
The IMF agreed to these changes after Pakistan assured timely implementation of all other economic reform targets. With this agreement, both the defence sector and millions of salaried individuals will receive long-awaited financial relief in the upcoming budget.