Budget 2025-26: Will Your Salary See a Tax Surprise?

Islamabad, 10 June 2025: The latest Finance Bill has brought forth considerable revisions to the income tax framework, particularly impacting salaried individuals.

A key highlight is the complete exemption from income tax for those earning up to 600,000 rupees annually, a measure set to provide relief to a substantial portion of the workforce. This adjustment to the Salary threshold marks a notable departure from previous tax regimes.

The proposed changes in tax rates for various Salary brackets are as follows:

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For those drawing an annual Salary between 600,000 and 1,200,000 rupees, the new proposal dictates a mere 1% tax on the amount exceeding 600,000 rupees. This is a significant reduction from the prior 5% on the entire slab.

Individuals with an annual income ranging from 1,200,001 to 2,200,000 rupees will now face a fixed tax of 6,000 rupees, alongside an additional 11% on the sum above this threshold. This represents a substantial decrease from the previous 15% rate.

Moving up the income ladder, those earning between 2,200,001 and 3,200,000 rupees annually will be subject to a fixed tax of 116,000 rupees plus an extra 23% on the remaining amount, down from 25%. The Salary component in this bracket still sees a notable adjustment.

For incomes spanning 3,200,001 to 4,100,000 rupees per annum, the fixed tax is set at 346,000 rupees with a 30% additional levy on the surplus, maintaining the current percentage.

Finally, individuals with an annual Salary exceeding 4,100,000 rupees will incur a fixed tax of 616,000 rupees, alongside an additional 35% tax on their income above this mark, with the highest bracket seeing no change in its percentage rate. These comprehensive adjustments aim to rationalize the tax burden across various income groups.