Income Tax Cuts for 2026: How Much You Save Under Pakistan’s New Budget
The federal government of Pakistan has unveiled a revised income tax structure effective July 1, 2025, offering significant tax relief to salaried individuals across all income tiers. This move is aimed at easing financial pressure on working professionals and boosting disposable income in the face of persistent inflation.
Let’s break down what’s changed and how much more you’ll take home starting July 2025.
Key Tax Relief Highlights (2026 vs 2025)
| Monthly Salary (PKR) | Annual Salary (PKR) | Annual Tax 2025 | Annual Tax 2026 | Monthly Tax Saving |
|---|---|---|---|---|
| 50,000 | 600,000 | 0 | 0 | 0 |
| 100,000 | 1,200,000 | 30,000 | 6,000 | 2,000 |
| 250,000 | 3,000,000 | 380,000 | 300,000 | 6,667 |
| 500,000 | 6,000,000 | 1,365,000 | 1,281,000 | 7,000 |
| 1,000,000 | 12,000,000 | 3,911,000 | 3,692,850 | 18,209 |
| 3,000,000 | 36,000,000 | 13,051,500 | 12,848,850 | 16,888 |
Across-the-board tax savings range from PKR 2,000 to PKR 16,888 per month, depending on income level.
What This Means for You
The new tax slabs are designed to deliver relief to middle- and upper-income earners, with the following implications:
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Increased take-home pay across all brackets
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Encouragement for formal employment, as salaried jobs become more financially rewarding
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Offsetting the impact of inflation, especially for urban professionals
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Boost to consumer spending, which can stimulate domestic economic activity
Why the Government Made This Move
This tax revision comes at a time when the government is targeting:
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GDP growth of 4.2% for FY2025–26
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A fiscal deficit reduction to 3.9% of GDP
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Lower inflation, projected at 7.5% for the upcoming fiscal year
By easing the tax burden, the government aims to improve public sentiment, especially within the urban salaried class, which has faced stagnant income growth and rising living costs.
Policy Direction: From Revenue Extraction to Economic Enablement
Finance Minister Muhammad Aurangzeb has emphasized economic productivity and competitiveness as core themes of Budget 2025–26. The revised income tax policy complements this by:
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Freeing up household capital for saving or investment
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Reducing financial stress for mid- to high-income earners
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Aligning fiscal policy with growth targets, not just revenue collection
Try Our Income Tax Calculator
Want to see how much you’ll save under the new policy?
Use the 2025–26 Income Tax Calculator:
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Enter your monthly gross income
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Get a breakdown of:
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Current tax (2024–25)
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New tax (2025–26)
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Monthly and yearly savings
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Updated take-home pay
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Example:
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Income: PKR 100,000/month
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2025 Tax: PKR 30,000/year
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2026 Tax: PKR 6,000/year
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Annual savings: PKR 24,000
Final Thoughts
While the new income tax policy does not address structural issues like low tax base expansion, it provides timely relief to salaried taxpayers — a group heavily burdened by direct taxes in recent years. If effectively implemented, it could:
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Strengthen public trust in fiscal policy
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Encourage documentation of income
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And fuel short-term consumption-led economic activity
The new income tax structure is a positive step toward a more equitable and growth-oriented tax regime — though much work remains on widening the tax net and improving compliance.
