In a significant move aimed at providing relief to the salaried class, the federal government has unveiled the revised Finance Bill 2025-26. One of the most notable changes is the exemption of income tax on annual salaries up to Rs600,000, alongside the introduction of new tax slabs for higher income brackets.
Key Highlights of the Revised Finance Bill 2025-26
No Income Tax on Salaries Up to Rs600,000
The government has raised the minimum income threshold for tax exemption from Rs400,000 to Rs600,000. This means individuals earning up to Rs50,000 per month will now be completely exempt from paying income tax.
Revised Tax Slabs Introduced
New progressive tax slabs have been introduced to ensure a fairer distribution of the tax burden. Higher earners will pay increased taxes, while middle-income earners see minimal changes. The revised slabs are structured to promote equity and improve revenue collection without putting excessive pressure on low-income citizens.
Increased Focus on Documentation and Digitalization
The bill also emphasizes tax reforms through enhanced digital systems, with increased penalties for non-filers and incentives for documented economy participants. This aligns with the government's ongoing drive to broaden the tax base and combat tax evasion.
Impact on the Middle and Upper-Middle Class
This revision brings considerable relief to millions of salaried individuals, particularly those struggling with inflation and rising living costs. By increasing the tax-free threshold, the government has effectively put more disposable income into the hands of low and lower-middle-income earners.
For upper-middle-income individuals, the new slabs might slightly increase the tax liability depending on income brackets. However, the government assures that this restructuring aims for fairness without being overly burdensome.
Reactions from Experts and Public
Positive Response from Economic Analysts
Economists and tax experts have largely welcomed the move, describing it as “a balanced approach” that will encourage tax compliance and provide relief to struggling households. Some experts believe this may even increase tax net participation due to its progressive nature.
Public Reception
The salaried class, especially those earning near the exemption limit, has expressed appreciation for the update. Social media and public forums are buzzing with positive feedback, though calls remain for further reforms in indirect taxation and inflation control.
Conclusion: A Step Toward Fairer Taxation
The revised Finance Bill 2025-26 represents a strategic shift in Pakistan’s taxation policy. By protecting low-income earners and restructuring tax slabs for fairness, the government has taken a step in the right direction. However, the success of this reform will ultimately depend on implementation, enforcement, and continued efforts to expand the tax net.
