The government of Pakistan is considering income tax relief for salaried individuals in the upcoming Budget 2026, while likely keeping salaries and pensions unchanged according to official sources.
The proposal is part of broader fiscal reforms aimed at easing the tax burden on the salaried class, which has been identified as one of the largest contributors to national revenue.
Officials suggest that Finance Minister Muhammad Aurangzeb is exploring options to reduce tax rates and possibly increase the tax-free income threshold for employees.
The aim is to provide relief to salaried individuals who have faced rising inflation and stagnant real wages in recent years. At the same time, the government may avoid salary and pension increases to prevent pushing employees into higher tax brackets.
Sources indicate that government salaries have increased significantly over the past four years, while private sector wages have largely remained stagnant. Policymakers believe that adjusting tax slabs may be more effective than increasing gross salaries.
The proposal is currently under review by the tax policy team and international consultants and will be discussed with the IMF mission during upcoming budget negotiations.
In addition, the development budget may be reduced further to maintain fiscal balance. However, final decisions will depend on ongoing discussions with international lenders.
Despite the proposed relief, the salaried class continues to be the largest tax-paying group in Pakistan contributing significantly more than sectors such as real estate, retail and exports.
Officials say that any final policy will aim to balance fiscal discipline, inflation pressure and public relief.
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