IMF endorses income tax alleviation for the salaried class in the 2025-26 budget.

In a significant advancement during the current budget discussions between Pakistan and the International Monetary Fund (IMF), the Fund has consented to grant income tax relief to the salaried sector

Official sources indicate that the IMF is now prepared to lower income tax rates across all income brackets.

Sources said that the relief will be provided via modifications to Section 129 of the Income Tax Ordinance, which regulates exemptions and concessions.

One significant proposed alteration involves increasing the annual tax-exempt income limit from the present Rs600,000 to Rs1 million.

This implies that monthly incomes up to Rs83,000 will be tax-exempt, representing a significant rise over the current exemption threshold of Rs50,000.

The proposed amendments may reduce the income tax rate on a monthly wage of Rs100,000 from 5% to 2.5%. Correspondingly, for a salary of Rs183,000, the tax rate may be decreased from 15% to 12.5%.

Employees with a monthly income of Rs267,000 may experience a reduction in their tax rate from 25% to 22.5%.

Furthermore, for monthly incomes not exceeding Rs333,000, the suggested rate may be decreased from 30% to 27.5%, but individuals earning above this threshold could encounter a maximum reduced rate of 32.5%, down from the existing 35%.

The IMF has recognized Pakistan’s defense priority as a significant development. Sources familiar with the negotiations indicate that the Pakistani administration asserted the nation could not postpone critical defense expenditures.

The IMF has allegedly consented to permit essential augmentations in the defense budget, signifying a significant concession in favor of Pakistan as both parties finalize fiscal strategies for the forthcoming year.