Salaried Class Faces 21% Rise in Income Tax Despite Government’s Relief Claims
Salaried employees in Pakistan are paying more taxes this year, despite repeated government promises of providing relief. According to official data, income tax contributions jumped to Rs. 85 billion in the first two months of FY2024-25, up from Rs. 70 billion in the same period last year — a sharp 21% increase.
Limited Relief Despite Budget Promises
Government officials admitted that the minor rate cuts announced in the recent federal budget did not significantly ease the burden. Finance Minister Muhammad Aurangzeb himself acknowledged that the state had limited fiscal space to offer meaningful concessions.
Last year, salaried workers already faced a steep tax rise, with collections surging 51% to Rs. 555 billion, reducing take-home salaries and squeezing household budgets. For employees whose taxes are deducted at source without expense adjustments, the pressure has become even greater.
Breakdown of Rising Tax Burden
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Non-corporate employees: Rs. 41.5 billion (↑ 26%)
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Corporate sector workers: Rs. 20 billion (↑ 26%)
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Provincial government staff: Rs. 10.5 billion (↑ 6%)
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Federal employees: Rs. 7.6 billion (↑ 8%)
Despite government claims of Rs. 56 billion in relief for those earning up to Rs. 3.2 million annually, the impact has been minimal when compared to actual tax collections.
New Pension Tax Falls Short
The government also introduced a new levy on annual pensions above Rs. 10 million, but the measure has underperformed. The Federal Board of Revenue (FBR) collected just Rs. 180 million in two months, with projections suggesting revenue may barely cross Rs. 1 billion — far below expectations.
Concerns Over SECP Salary Hikes
At the same time, scrutiny is growing over the high pay packages of Securities and Exchange Commission of Pakistan (SECP) officials. The Auditor General of Pakistan (AGP) has flagged steep salary increases for SECP commissioners and the chairman, raising further questions about fiscal priorities.
Outlook
While the government struggles to expand its tax base, the salaried class continues to shoulder a disproportionate share of the tax burden. Analysts warn that without structural reforms, rising deductions on fixed-income earners could worsen financial strain on middle-class households.
