Karachi, May 2, 2025 – The Karachi Tax Bar Association (KTBA) has called upon the federal government to increase the tax-exempt threshold on salary income from the current Rs600,000 to Rs1.2 million in the upcoming budget for the fiscal year 2025-26.
The association believes this revision is essential to reflect the impact of recent inflation and to offer relief to salaried individuals burdened by rising living costs.
In its formal tax proposals, KTBA emphasized that the existing salary income exemption limit is outdated and fails to account for the economic challenges faced by the salaried class in recent years. The KTBA pointed out that despite soaring inflation, the current exemption threshold has remained stagnant, creating undue pressure on low- to middle-income earners.
According to KTBA, the tax burden on salary income has become disproportionate, especially when compared to other sources of income where deductible expenses are allowed. Currently, individuals earning salary income are not allowed to claim any expenses incurred in the process of earning that income. The KTBA strongly recommended that salaried individuals be allowed a flat 15% deductible allowance, similar to the deductions granted against rental income, to cover commuting and other unavoidable job-related expenses.
KTBA further suggested that the maximum tax rate on salary income, which now stands at 35%, should be gradually brought down to 25%. This step, they argue, would not only ease the financial pressure on salaried workers but also promote tax compliance and formal employment.
By recommending the increase in the exempt limit for salary income to Rs1.2 million, KTBA aims to ensure a more equitable taxation structure. It also calls for policy consistency across different types of income, especially considering that no expense deductions are permitted under the current salary income regime.
In conclusion, KTBA’s proposal advocates a fairer and more inflation-sensitive approach toward salary income taxation. By revising the exemption threshold and allowing certain deductions, the government can provide meaningful relief to salaried individuals and promote a more balanced tax system.