The weighed down salaried class will finally have some sigh of relief as the federal government on Saturday announced that it has reduced the tax rate for those individuals earning up to Rs1.2 million per year from 5% to 1%.
“The salaried class bears the burden of inflation and also pays [due] taxes. The reduction in the income tax is already part of the proposed budget [for FY26]. On the directions of Prime Minister Shehbaz Sharif, the government has reduced tax on those earning from Rs600,000 to Rs1.2 million per year from [the proposed] 2.5% to a [mere] 1%,” Finance Minister Muhammad Aurangzeb said while speaking during a Senate session.
“We [the government] hope that this move will not only result in the increase of disposable income of the [salaried] class but also restore their trust in the taxation system,” the finance czar stated.
The government’s Rs17.57 trillion budget for FY26 includes significant income tax relief for the salaried class. Initially, the tax rate for individuals earning between Rs600,000 and Rs1.2 million annually was proposed to be reduced from 5% to 2.5%.
However, Finance Minister Aurangzeb has now confirmed that it will be further lowered to 1%, aligning with Prime Minister Shehbaz Sharif’s earlier announcement to the federal cabinet.
For those with an annual income of up to Rs2.2 million, the tax rate will drop from 15% to 11%—a reduction of 4%. Similarly, individuals earning between Rs2.2 million and Rs3.2 million will see their tax rate slightly decrease from 25% to 23%.