Islamabad, June 21, 2025 – Finance Minister Senator Muhammad Aurangzeb on Saturday announced significant tax relief for the salaried class, stating that salary income of up to Rs1.2 million annually will now be subject to only 1% income tax from the next fiscal year.
Speaking during the budget wrap-up debate in the Senate, Aurangzeb said this step reflects the government’s broader vision for inclusive and sustainable growth.
Addressing senators in the Upper House, Aurangzeb emphasized that the government’s efforts are not limited to achieving economic stability, but also focus on empowering middle-income citizens. He said that this revision of the salary tax structure—reducing the rate from 2.5% to 1%—is a direct effort to ease financial stress on compliant taxpayers.
The finance minister reiterated that the government managed to contain inflation, reduce the current account deficit, and improve foreign exchange reserves without resorting to any mini-budget during the outgoing fiscal year. He credited fiscal discipline for these achievements, noting that overall government expenditures rose by just 1.9%, compared to double-digit increases in previous years.
Highlighting the key relief measures for working citizens, Aurangzeb announced a 10% increase in salaries and a 7% increase in pensions for government employees. He said these measures reaffirm the state’s commitment to those bearing the brunt of rising living costs. “This salary enhancement is not merely symbolic—it’s recognition of the mounting financial challenges faced by the average citizen,” he said.
Aurangzeb stated that the government’s decision to ease the salary tax burden is grounded in the belief that the state must not penalize honest taxpayers. By allowing greater disposable income, the government aims to stimulate consumption and rebuild public trust in the tax system.
On the issue of clean energy, Aurangzeb clarified that the proposed 18% sales tax on imported solar panel components has been revised down to 10%, and will apply only to a subset—around 46%—of items. This move is designed to encourage domestic solar manufacturing while curbing tax evasion in the name of clean energy imports.
The minister also announced a major uplift in the Benazir Income Support Programme (BISP), increasing its allocation from Rs592 billion to Rs716 billion. This, he said, reflects a long-term commitment to uplift Pakistan’s most vulnerable, including widows, orphans, the old-age, and people with disabilities.
Further, Aurangzeb highlighted that additional safeguards will be included in the proposed FBR laws to prevent abuse of enforcement powers. These safeguards were refined after consultations with senior senators including Saleem Mandviwalla and Farooq H. Naek.
He concluded by thanking the Senate for its constructive engagement, noting that over 50% of the Senate Standing Committee’s recommendations will be included in the final Finance Bill, shaping a people-centric fiscal path forward for Pakistan.