Despite a minor reduction in tax rates across various salary slabs in the 2025-26 budget, the already burdened salaried class will still pay Rs535 billion in income tax next fiscal year, leading the National Assembly Standing Committee on Finance to express disappointment, stating that the proposed relief does little to alleviate the financial burden on workers.
According to a news report, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial informed the committee that the government had proposed a tax rate reduction of 2% to 4% for 981,051 salaried individuals, translating into Rs56 billion in relief.
However, despite the tax cuts, the government is still expecting to collect a total of Rs535 billion from salaried individuals in the next fiscal year. This is primarily due to a 10% increase in salaries and modest economic growth, which means the burden on the salaried class remains high.Â
Syed Naveed Qamar, Chairman of the Standing Committee, called the proposed tax relief a “joke,” emphasizing that the relief does not address the core financial pressures faced by the salaried class.
The committee also pointed out that in the previous fiscal year, the income tax burden on salaried individuals had already increased significantly, with tax collection from the salaried class rising from Rs368 billion to Rs540 billion. Despite the slight reduction, FBR’s projections show that the overall tax revenue from salaried individuals will remain substantial.
The government has reduced the tax rates for individuals earning up to Rs2.2 million annually by 4%, while those making up to Rs3.2 million will see a 2% reduction. However, individuals in the higher income brackets will not benefit from any direct relief. The FBR also clarified that individuals in the two highest tax brackets—30% and 35%—would still receive an indirect benefit through the reduction in lower slabs, which would lower their overall effective tax rates.
While the committee appreciated the government’s attempts to address the tax burden, it raised concerns about the lack of substantial relief, particularly for lower and middle-income individuals. Moreover, the committee highlighted that the tax rate for those in the Rs1.2 million income bracket, which had previously been reduced to 1% under an agreement with the IMF, has now been set at 2.5% to fund higher government salaries.
Committee members also questioned the introduction of new tax measures targeting the digital economy, particularly the 2% withholding tax on cash-on-delivery transactions. There were calls for the government to raise the cash withdrawal threshold for withholding taxes from Rs50,000 to Rs75,000 and to reconsider the tax treatment for small-income earners and pensioners.
In a related discussion, Langrial acknowledged that the imposition of a 3% federal excise duty on immovable property in the previous fiscal year was a “theoretical mistake and unjust” and confirmed that the duty would be abolished in the upcoming budget.
