Federal budget 2025-26: Cut in taxation rates for salaried people likely

ISLAMABAD: The revenue impact of the taxation measures to be taken in the coming budget 2025-26 would be neutralised through tax relief measures including at least 2.5 percent reduction in income tax slabs for salaried individuals and reduction in withholding tax rates and corporate income tax rate.

Sources told Business Recorder here on Friday that if the government proposes taxation measures of Rs500-600 billion, the net impact of the revenue measures should be minimised through tax relief measures.

The government will try to cover the revenue impact of the taxation measures with the relief measures in the coming budget.

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However, the government is also exploring other avenues to overcome shortfall as a result of relief to salaried class etc. “If revenue measures are with the tax relief measures, there might be zero net revenue impact of overall measures for next fiscal year,” the official quoted an example.

Sources said that the revenue collection from the salaried class is much high as compared to projected revenue during the outgoing fiscal year. Therefore, the government is committed to reduce tax by 2.5 percent in each higher slab of salaried individuals. In this regard working is underway.

Another proposal is to reduce corporate tax rate as well as “Super Tax” in the upcoming budget.

The proposal is to raise the income tax exemption threshold from Rs0.6 million up to Rs1 million under the Income Tax Ordinance, 2001.

This is a relief measure for the general public to considerably enhance exemption threshold of income tax, the sources added.

Copyright Business Recorder, 2025