In the newly announced federal budget for 2025–26, the Government of Pakistan has introduced updated income tax slabs for salaried individuals. These new rates apply from July 1, 2025, and aim to increase revenue while keeping lower-income groups protected.

Key Highlights of the New Tax Policy:

The updated tax slabs apply only to salaried individuals and are based on annual income. The government has kept the first 600,000 PKR tax-free, continuing relief for low-income earners.

Annual taxable salary	Tax payable	Marginal rate
Up to 600,000 PKR	0 %	0 %
600,001 – 1,200,000 PKR	2.5 % of the amount exceeding 600,000	2.5 %
1,200,001 – 2,200,000 PKR	6,000 PKR + 11 % of the amount exceeding 1,200,000	11 %
2,200,001 – 3,200,000 PKR	116,000 PKR + 23 % of the amount exceeding 2,200,000	23 %
3,200,001 – 4,100,000 PKR	346,000 PKR + 30 % of the amount exceeding 3,200,000	30 %
Above 4,100,000 PKR	616,000 PKR + 35 % of the amount exceeding 4,100,000	35 %

What Does This Mean?

• No tax for people earning up to 50,000 PKR per month
• A small tax (2.5%) for incomes between 50k–100k PKR/month
• Higher earners above 200k/month will see larger deductions, especially those in the 25–35% slabs

For example, someone earning 200,000 PKR per month will now pay around 125,000 PKR annually in income tax.

Government’s Justification:

Officials stated that this structure is designed to:

• Promote fairness by taxing higher income groups more
• Provide relief to middle-class and low-income employees
• Boost tax revenue without introducing new indirect taxes

When Will It Be Applied?

These new tax rates will come into effect from July 1, 2025, and will apply to salaries received during the 2025–26 fiscal year.

Public Reaction:

While salaried individuals under 100,000/month have appreciated the relief, many in the higher brackets are concerned about the steep jump in tax rates. Analysts believe it reflects the government’s push to widen the tax net and reduce reliance on indirect taxation.