The upcoming federal budget for the fiscal year 2025-26, set to be presented in the first week of June 2025, is unlikely to bring any significant tax relief for the salaried class.
The government appears reluctant to ease the financial burden on salaried individuals, primarily due to a substantial increase in tax collection from this segment.
According to provisional data, the salaried class has already contributed approximately Rs 331 billion in income tax during the first eight months (July-February) of the fiscal year 2024-25. This represents an increase of nearly 57% compared to the Rs 211 billion collected during the corresponding period of the previous fiscal year. The Federal Board of Revenue (FBR) has estimated an additional Rs 75 billion in tax revenue from this segment for the current fiscal year, while the total tax collected from the salaried class has already surpassed Rs 120 billion.
A recent media report quoted FBR Spokesperson Dr. Najeeb Memon, stating that the government will review the taxation structure for the salaried class during the upcoming budget formulation process. However, no concrete assurances have been given regarding potential tax relief.
In the last fiscal year, the salaried class paid Rs 368 billion in taxes. Despite this heavy tax burden, salaried individuals, who are taxed on their gross income without any expense adjustments, did not receive any concessions. The government also refrained from addressing this issue during its recent discussions with the International Monetary Fund (IMF), further diminishing hopes for relief.
One of the most pressing concerns for the salaried class is the increased tax burden imposed in the last budget. The government reduced the number of tax slabs, which disproportionately impacted middle- and upper-middle-income earners. The maximum tax rate of 35% is now applied to those earning Rs 500,000 per month, and an additional 10% surcharge pushes the effective tax rate to a staggering 38.5% for the highest earners.
Breaking down the contributions from the salaried class, non-corporate sector employees paid Rs 141 billion in income tax this year, reflecting a 43% increase. Employees in the corporate sector contributed Rs 101 billion, marking a 56% rise. Additionally, provincial government employees paid Rs 57 billion, a 96% jump, while federal government employees contributed Rs 34 billion, up by 66%.