Taxable income threshold may rise to Rs0.8 million

The federal government is likely to enhance the threshold of taxable annual income from Rs600,000 in the upcoming budget, provided it secures approval from the International Monetary Fund (IMF).

In addition, the government is also mulling over the imposition of taxes on pensioners drawing substantial amounts.

According to the Federal Board of Revenue (FBR), the proposed relief for the financial year 2025-26 is limited to lower income slabs, with no recommendations under consideration for individuals earning high salaries.

According to sources, three proposals are currently being examined to extend relief to the salaried class in the next fiscal year.

One such proposal suggests increasing the taxable annual income threshold from Rs600,000 to Rs800,000. However, a final decision will only be made following further consultation.

The government also plans to simplify the income tax return form and revise the sales tax rate.

Furthermore, a relief measure for salaried individuals earning between Rs600,000 and Rs1.2 million annually is also under review.

Sources added that pensioners receiving substantial pensions are also under consideration, with a proposal to levy a tax of 5 per cent on annual pensions of Rs800,000; 10 per cent on Rs800,000 to Rs1.5 million; 12 per cent on Rs1.5 million to Rs2 million; 15 per cent on Rs2 million to Rs3 million; and 20 per cent on pensions exceeding Rs3 million.

These, however, remain preliminary recommendations, and final decisions will be taken following a detailed evaluation and consultation process.