When Pakistan rolled out its budget for fiscal year 2025–26 in June 2025, it promised a measure of relief for salaried workers, an increasingly vocal segment in a country grappling with inflation and widening fiscal deficits. But as with many government measures, the impact depends on who you are: a low-income urban worker, a mid-level professional, or someone pulling in a hefty salary. Let’s unpack who stands to gain—and who might still be left behind.
What’s on Offer for the Salaried Class?
The government has introduced an adjusted schedule of income tax slabs aimed specifically at salaried individuals:
- Lowest earners (PKR 600,000–1.2 million annually): tax rate dropped from 5% to as low as 1–2.5%, depending on tweaking due to civil servant pay adjustments. For someone earning PKR 100,000 per month, the yearly tax falls sharply, from PKR 30,000 to around PKR 6,000.
- Mid-income range (PKR 1.2–2.2 million/year): tax rate trimmed from 15% to 11%, along with a lowered fixed component, offering hundreds of rupees monthly in boosted take-home pay.
- Upper-middle tier (PKR 2.2–3.2 million): tax rate reduced from 25% to 23%, accompanied by a decrease in fixed charges, resulting in annual savings of approximately PKR 84,000.
- High earners (above PKR 10 million): a modest 1% reduction in surcharge, intended to retain high-paid professionals.
These tax cuts are part of a broader austerity budget that kept total spending down by about 7% and gave defence its own 17–20% boost following recent tensions with India.
Who Truly Benefits?
1. Entry-Level & Lower-Middle Earners
This group sees the most significant relative gain. For someone earning PKR 50,000 per month, the tax cut from PKR 30,000 to around PKR 6,000 annually frees up approximately PKR 2,000 per month in extra pocket money, which is meaningful in a high-inflation environment.
2. Mid-Level Professionals
If you’re earning around PKR 200,000/month, your monthly savings jump by roughly PKR 6,500–7,000—enough to cover an extra utility bill or monthly grocery run.
3. Upper-Middle Salaried Individuals
Take-home pay improves, though proportionally less impactful than for lower tiers. These savings can help offset education or healthcare costs.
4. High-Income Earners
For those earning over PKR 1 million per month, the surcharge cut helps some, but the effect is marginal. Without deeper structural reform, this group feels it’s less valued compared to the burden they already bear.
The Bigger Picture: Is This Enough?
While the relief is both clever and timely, especially amid IMF-mandated fiscal discipline, there are caveats:
- The PKR 600,000 exemption threshold remains intact, despite calls from salaried advocates requesting a higher threshold of PKR 1.2 million. Relief remains uneven.
- Offsetting new taxes: With heavier taxes on bank interest, pensions, property, and cash withdrawals, some benefits are partially canceled out.
- Budget constraints remain tight: Defence has received a significant boost, while development spending has been cut, and more revenues are being squeezed from agriculture, retail, and real estate, raising questions about long-term tax fairness.
- The tax base remains narrow, with salaried individuals currently accounting for over 98% of filers. Without including agriculture, retailers, and property in the net, the relief adds pressure to this already small group.
So, Who Really Wins?
- Clear winners: The low- to mid-income salaried class. Their living standards are the most immediately impacted. An additional PKR 5,000–7,000 per month isn’t small change in today’s economy. Plus, 7–10% salary and pension hikes for federal workers add to the boost.
- Modest gainers: Upper-middle earners—who save a few thousand rupees monthly but get less relief relative to their income share.
- Marginal winners: High-income individuals benefit primarily from the surcharge tweak, but it won’t significantly alter their situation, especially with the mounting indirect taxes.
Is It Sustainable?
Doubtful. The tax base remains tiny, government revenues still lag, and defense and debt servicing take significant chunks out of the budget. The IMF is watching, and more revenue must come from agriculture, real estate, and retail—even as the salaried segment is getting marginal breathing room.
Verdict: A Sensible, Yet Incomplete Move
Pakistan’s 2025–26 budget skillfully doles out relief to the salaried class—especially those in the lower and middle tiers—without completely derailing fiscal discipline. It boosts monthly incomes by significant sums and eases some of the inflationary pain.
However, unless broader reforms are implemented—such as expanding the tax base, eliminating unnecessary subsidies, and modernizing revenue collection—the relief may ultimately be a short-term victory in a longer-term struggle.
Final Thought
The taxpayer relief in this budget doesn’t come for free. It’s funded by restraint elsewhere and hinges on future revenue growth. For now, it’s a moment of respite—but whether it can be sustained or matched with more profound structural changes is Pakistan’s next big question.
