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

The federal cabinet on Tuesday is all set to approve the key proposals for budget 2025-26. The session chaired by PM Shehbaz Sharif will be held at 4:00 PM.

The National Assembly session will follow at 5:00 PM, where Finance Minister Muhammad Aurangzeb will present the budget 2025-26.

Following are the major proposals for the budget 2025-26, which are to be approved by the federal cabinet before presentation in the NA.

Salaries & pensions

The federal government has proposed to increase government employee salaries by 10 per cent and pension hike is expected to rise between 7.5 to 10 per cent.

Taxation for salaried class

Hopes for major relief dim for salaried individuals in the budget 2025-26 as IMF opposed tax-free income slab of Rs1.2 million annually.

It is expected that minimum 1% income tax on annual salary of Rs1.2 million proposed. Tax-free income slab expected to stay at Rs600,000. 2.5% relief proposed for all income tax slabs

Corporate income tax rate may be fixed at 2.5%.

Read more: Pakistan set to unveil Rs17.8tr budget 2025-26 with tax reforms today

Austerity & administrative measures

Under IMF directions, a ban on purchase of new vehicles by federal ministries and departments is proposed in the budget 2025-26.

Proposal to cap utility bills in all government sectors is also suggested. IMF has also demanded strict ban on supplementary grants except in natural disasters.

Rs7,503 billion allocated for domestic debt and interest payments. Rs1,119 billion reserved for foreign debt servicing.

Welfare & development

Quarterly stipend is likely to rise above Rs13,500 in FY26; to increase to Rs14,500 from Jan 2026. Total federal revenue projected at Rs. 19.3 trillion.

The government has proposed to transfer 57.5 per cent of FBR tax revenues to provinces. Furthermore, Rs8,107 billion to be given to provinces under NFC.

Current account deficit forecast at 0.5% of GDP (approx. $2.1 billion)

Trade & external sector

Exports target and import target have been proposed at $35.3 billion and $65.2 billion, respectively, in the budget 2025-26.

Services exports target: $9.6 billion; services imports: $14 billion. Remittance target: $39.4 billion.

Combined exports (goods + services) target: $44.9 billion. Combined imports target: $79.2 billion.

Education, industry & infrastructure

Rs250 million allocation is proposed for 1,000 industrial stitching units.

Launch of Laptop Scheme and Pak-Bangladesh Friendship Scholarship Program in FY2025-26.

Power transmission and distribution upgrades in 15,352 villages. Power generation to increase by 2,800 MW (including 2,633 MW via solar net metering)

Focus on ML-1 and Karachi Circular Railway projects. Infrastructure package for AJK, GB, and merged districts.

Crackdown on hidden POS devices

The Pakistan government has proposed tougher amendments in Income Tax Ordinance for non-filers in budget 2025-26.

Non-filers to be barred from purchasing vehicles and property. Proposed ban on mutual fund and stock market investments for non-filers

Foreign travel ban (except pilgrimage) for non-filers. Rs600 deduction on withdrawals over Rs50,000 for non-filers.