How Much Tax Relief Did Pakistan 2025–26 Budget Offer Salaried Employees?

Pakistan federal budget for FY2025–26, presented on June 10, 2025, introduced important tax relief for the salaried class. With inflationary pressures and rising living costs, the government aimed to deliver concrete financial breathing room for middle-income earners.

In this blog, we present a complete, easy-to-understand breakdown of the new tax structure, how it compares to last year, and practical guidance for salaried employees.

For a deeper look into salary structuring and compliance, check out our guide on Understanding Salary Slabs & Tax Filing in Pakistan.

Revised Tax Slabs: FY2025–26 vs FY2024–25

Here a clear comparison of the revised tax slabs:

Additional Change: The super tax surcharge on income above PKR 10 million has been reduced from 10% to 9%.

Who Benefits the Most?

Middle-Income Earners (PKR 600k – 1.2m):

• Old Tax: PKR 30,000
• New Tax: PKR 6,000
• Relief: 80% reduction

Salaries Between PKR 1.2m – 2.2m:

• Annual savings of approx. PKR 88,000

Salaries Between PKR 2.2m – 3.2m:

• Annual savings of around PKR 44,000

High Earners (above PKR 4.1m):

• No change in main slabs; marginal relief from 1% surcharge cut

Effective Monthly Take-Home Pay Examples

For ways to retain more of your income, don’t miss our detailed breakdown of Tax-Saving Investment Options for Pakistani Payroll.

Budget Context: Why This Relief Was Needed

• Total Budget Outlay: PKR 17.57 trillion
• Income Tax from Salaried Class (Jul-Feb FY25): PKR 331 billion, up 56% YoY
• Defense Spending Increase: Up 20% to PKR 2.55 trillion
• Tax-to-GDP Ratio Target: Aim to increase from ~10% to 14%

Source: Arab News, Financial Times, Taxation Pk

Actionable Advice for Salaried Individuals

• Reassess Salary Negotiations: With relief available, factor net salary into job decisions.
• Utilize Investment Deductions: Take advantage of deductions for retirement and insurance investments.
• Track Your Withholding: Verify monthly deductions to ensure accurate application of new slabs.

Frequently Asked Questions

Q: When do the new slabs take effect?
A: July 1, 2025

Q: Do these changes apply to freelancers?
A: No, these changes only apply to salaried individuals.

Q: Is the surcharge deducted monthly?
A: Yes, it is prorated across the fiscal year.

Final Thoughts

Pakistan 2025–26 budget represents a positive move toward easing financial pressure on the salaried class. While middle-income groups see meaningful relief, higher earners receive marginal benefits. The success of this reform depends on execution, transparency, and further broadening the tax net.