IMF agrees to income tax relief for salaried class in upcoming budget 2025-26

ISLAMABAD: In a significant breakthrough in the ongoing Pakistan–International Monetary Fund (IMF) budget talks, the Fund has conceded income tax relief to the salaried class, according to sources.

According to the details, the IMF is now ready to lower income tax rates on all slabs of salary, according to official sources.

Sources also confirmed that the relief will be made available in the form of Section 129 amendments of the Income Tax Ordinance, the law that regulates exemptions and concessions.

One of the key reforms up for discussion involves the increase in tax-free income annually from the prevailing Rs600,000 to Rs1 million.

That would translate to monthly wages up to Rs83,000 being taxed away — a significant jump from the existing Rs50,000 exemption threshold.

Under the new proposals, tax on an income of Rs100,000 per month can be slashed to 2.5% from the current 5%. Likewise, for an income of Rs183,000, tax can be reduced to 12.5% from the current 15%.

Employees who earn Rs267,000 every month might have their tax rate reduced from 25% to 22.5%.In addition, for monthly pay of up to Rs333,000, the suggested rate might be cut from 30% to 27.5%, and those who make more than that might be subjected to a lesser top rate of 32.5%, down from 35%.

In another important breakthrough, the IMF has also accepted Pakistan‘s defence requirements. Informed sources of the negotiations stated that the government of Pakistan insisted that the nation could not wait to meet vital defence spending.

The IMF has been said to agree on permitting necessary defence budget increases, a significant concession in favor of Pakistan as the two sides complete fiscal proposals for the coming year.