The federal government is considering significant relief measures for the salaried class in the upcoming Budget 2025–26, sources said, with proposals for income tax cuts, pay raises for government employees, and sector-specific support under review.

According to sources, the government is working on special instructions from the Prime Minister to provide relief in various sectors. The proposals include reducing income tax rates, particularly for salaried individuals, and raising government salaries.

As per the proposals under discussion, a reduction of up to 2.5% in income tax slabs is being considered. For individuals earning a monthly salary of Rs100,000, the tax rate may be reduced from 5% to 2.5%. Those earning Rs 183,000 per month could see a reduction in tax from 15% to 12.5%, while individuals with monthly incomes of Rs 267,000 may benefit from a tax cut from 25% to 22.5%. Similarly, the tax rate for those earning Rs333,000 per month is likely to be slashed from 30% to 27.5%.

A salary increase for government employees has also been proposed and is expected to be officially announced in the budget speech.

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Sources also revealed that relief packages for small farmers are being prepared, which may include the launch of loan schemes and measures to reduce production costs. Additionally, tax reliefs for the manufacturing and construction sectors are being considered.

One major proposal under the upcoming budget is the removal of Rs200 billion worth of withholding tax on raw materials. A cut in withholding tax on raw materials used in construction is also on the table.

The proposed measures have reportedly been discussed in detail with the International Monetary Fund (IMF), with initial feedback from the Fund being positive. However, the IMF has insisted that the government present a viable alternative revenue plan to offset the relief measures. The government’s economic team has already briefed the IMF in this regard.

The final approval of the budget proposals will be announced during the budget speech by the Finance Minister, scheduled for mid-June.

Federal budget 2025–26: Govt mulls relief package for salaried class