Budget 2025–26: 10 per cent salary hike proposed for govt employees

The federal government has proposed a 10 per cent increase in salaries for government employees in the budget 2025–26, while pensions are likely to be raised between 7.5% and 10%.

According to budget 2025-26 proposals, the salaries and pensions of the government employees likely to be raised.

However, prospects for significant tax relief for salaried individuals appear dim, as the International Monetary Fund (IMF) has reportedly objected to maintaining the current annual tax-free income threshold of Rs1.2 million.

As a result, the government is considering the introduction of a minimum 1% income tax on annual salaries at that level, with the tax-exempt limit likely to be reduced to Rs600,000.

A general income tax relief of 2.5% across all slabs has been proposed, though the final decision remains pending.

Read more: Budget 2025-26: Key highlights and proposals for next fiscal year

Additionally, the government may fix the corporate income tax rate at 2.5% in an effort to broaden the tax base and meet fiscal targets under the IMF programme.

The meeting of the federal cabinet will be chaired by PM Shehbaz Sharif today at 4pm to pass the budget 2025-26 proposals before tabling them into the National Assembly (NA).

The Federal Budget for the next fiscal year will be presented in the National Assembly by Finance Minister Muhammad Aurangzeb. Later, he will lay a copy of the Finance Bill, 2025, containing the Annual Budget Statement before the Senate.