Salaried Class Representatives Criticize Budget 2025-26 Tax Proposals

The Salaried Class Alliance of Pakistan (SCAP) voiced concerns on Thursday, stating that the government’s budget proposals for the fiscal year 2025-26 offer minimal income tax relief to salaried individuals, characterizing it as mere “number juggling.”

During a press briefing at the Karachi Press Club on Thursday, SCAP representatives highlighted the tax authorities’ aim to collect Rs540 billion in income tax from employees within regulated sectors in FY26, slightly less than the Rs550 billion expected in the current FY25.

Bilal Farooq Rizvi, a SCAP member, commented, “The supposed Rs10 billion relief for the entire working class nationwide is a deceptive manipulation of figures.”

“We reject the government’s claim of providing relief to the salaried class in the budget 2025-26,” he asserted.

Federal Board of Revenue (FBR) data indicates that income tax collection from salaried individuals in FY25 is projected to reach Rs550 billion, exceeding the FBR’s initial target for the year by Rs112 billion.

Tax Rate Adjustments in Budget 2025-26

The budget proposals for FY26 outline a reduction in the tax rate from 5% to 2.5% for those earning between Rs600,001 and Rs1.2 million. Individuals with incomes between Rs1.2 million and Rs2.2 million will see their tax rate decrease from 15% to 11%, accompanied by a reduction in the fixed tax component from Rs30,000 to Rs6,000. For the Rs2.2 million to Rs3.2 million income bracket, the rate has been lowered from 25% to 23%, and the fixed tax has been adjusted from Rs180,000 to Rs116,000.

Tax rates for those with annual earnings exceeding Rs3.2 million remain unchanged. The 30% tax rate on incomes up to Rs4.1 million and the 35% rate for higher earners will continue. However, fixed taxes for these two brackets have been reduced to Rs346,000 and Rs616,000 from Rs430,000 and Rs700,000, respectively.

A slight reduction has also been introduced in the form of a 1% decrease in the surcharge, bringing it down to 9% from 10% for individuals earning over Rs10 million annually.

SCAP’s Concerns and Demands

Adeel Khan, another SCAP member, stated that “income tax collection from salaried individuals has increased dramatically, rising to Rs550 billion in FY25 compared to Rs70-80 billion in recent years.”

He added that the government is targeting the salaried class to meet the FBR tax collection target of Rs14.1 trillion in FY26, considering them a less resistant group compared to political parties or shopkeepers.

Khan noted that the government’s relief amounts to a maximum of Rs7,000 per month for middle-income earners, reducing their monthly tax burden from Rs500,000 in FY25 to Rs493,000 in FY26.

Iesha Fazal, a SCAP member, described the provided relief as insignificant and a mockery of the salaried class.

SCAP has urged the relevant authorities to lower income tax rates by at least 2.5% for all taxable brackets, including those in higher income ranges.

The Parliament still needs to approve the proposed budget and Finance Bill 2025, leaving room for potential adjustments.

Another SCAP member, Rizwan Hussain, mentioned the possibility of filing a legal case to secure appropriate income tax relief if the government approves the tax rates outlined in the Finance Bills 2025.

He also reiterated SCAP’s call for the complete removal of the super tax, which the government reduced by 1% to 9% in the budget proposals for FY26. Hussain also advocated for tax relief on investments in mutual funds and similar investment products for FY26.