Budget 2024-25: Pension reforms and tax proposed

ISLAMABAD: Preparations are underway for the federal budget 2024–25; there is a possibility of taxation on more than one lakh pensions, here on Wednesday.

As per the details, the federal government is working on various proposals to increase the salaries of public sector employees by 10 to 15 percent in the upcoming budget for 2024–25.

The Shehbaz led government is ready to introduce pension reforms.

The government will have to demonstrate its political will to take tough fiscal measures amid the government’s willingness to sign a deal with the IMF under the Extended Fund Facility (EFF) to the tune of $6 billion.

FBR includes increasing revenue from both tax revenue and non-tax revenue as well as limiting expenditure. The government is considering options to set the FBR tax revenue target above Rs 12.5 trillion in the upcoming budget.

On the salary front, the finance ministry wants to increase the salary by only 10 percent. Still, there may be some pressure, so the next budget may have a fiscal adjustment to increase the salary increase to 12.5 or 15 percent to bring it down to 2.5 percent or at most 5 percent.

Another proposal is under consideration to increase vehicle monetization from 20 to 25 percent for higher-grade officers in grades 20, 21, and 22.

Grade 20 officers are monetizing vehicles at Rs 67,000 per month, Grade 21 officers at Rs 77,000 per month, and Grade 22 officers at Rs 87,000 per month.

Top government sources confirmed that the government is all set to introduce pension reforms in the next budget of 2024–25. A proposal to levy tax on pensioners drawing more than Rs 1 lakh per month is also under consideration. It is likely that the government may introduce different slabs for higher pensioners in the next budget.

Top government sources confirmed to an English newspaper that we may propose raising the age limit of public sector employees by two or five years with a comprehensive package of pension reforms in the next budget of 2024–25.

According to various proposals, federal government employees will be entitled to a gross pension based on 70% of the average pensionable pay earned during the last thirty-six months of service before retirement.

A government servant can opt for early retirement after 25 years of service, but the employee may be liable to a penalty of reduction of 3% per annum in the gross pension from the year of retirement until the age of retirement. Any increase in pension can be credited to the pension calculated at the time of retirement.

A family pension is admissible only to the surviving family members, after the death or disqualification of the spouse, for a maximum period of 10 years.

Provided that in the case of a martyr pension, the maximum period to be provided to the dependents shall be 20 years after the death or disqualification of the spouse. Further, in the case of disabled or special children of a pensioner, a family pension may remain admissible for the life of such children.

Read More: Pension, salary of govt employees likely to rise in Budget 2024-25: Details inside

The federal government employee may be allowed to deduct a maximum of 25% of his gross pension at the time of retirement on terms and conditions prescribed by the federal government.

In a case where a Federal Government pensioner is re-employed or appointed after retirement, whether on a regular or contractual basis or in any mode of employment, the pensioner may have the option to retain the pension, or during this period of employment, the salary of the said employment can be drawn. In a case where a person becomes entitled to more than one pension, such person may be entitled to receive any one of the pensions.