The Federal Board of Revenue (FBR) is working on two key proposals for the upcoming budget of the financial year 2025-26, one of which involves imposing a tax on individuals receiving higher pensions, while the other proposes increasing the current income tax exemption limit for ordinary citizens.
According to sources, both proposals will be presented to the Prime Minister for approval, and initial work on these proposals has begun at the FBR.
FBR’s first proposal suggests that individuals receiving a monthly pension of 400,000 rupees or more be subjected to a modest tax. This amounts to 4.8 million rupees annually. According to the proposal, a possible 2.5% monthly tax could be imposed.
The aim of this proposal is to target only those individuals who receive very high pensions and lead a luxurious lifestyle. It will not apply to regular retired employees or those receiving lower pensions.
According to FBR officials, this proposal may initially apply to retired officers of Grade 22, former judges, senior bureaucrats, and retired military officers.
FBR’s second proposal provides relief for ordinary citizens. Currently, no income tax is levied on annual earnings up to 600,000 rupees in Pakistan. FBR proposes increasing this tax-free limit to offer some relief to citizens burdened by inflation.
This increase would provide financial ease for the middle and low-income classes and may also help expand the tax net, as individuals are more likely to pay taxes when the exemption limit is raised.
