The government plans to collect Rs535 billion in income tax from the salaried class in FY 2025-26, despite offering only Rs56 billion in tax relief. The relief comes from a 2% to 4% reduction in tax rates across various salary slabs. However, the National Assembly Standing Committee on Finance called this relief a “joke,” saying it does not ease the financial pressure on workers.
Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial told the committee that about 981,051 salaried individuals will benefit from the minor tax cuts. Still, the overall tax collection remains high due to a 10% rise in salaries and modest economic growth. This keeps the burden on the salaried class heavy.
The committee highlighted that tax collection from salaried people rose sharply from Rs368 billion to Rs540 billion last year. While the government cut tax rates for those earning up to Rs2.2 million by 4%, and up to Rs3.2 million by 2%, higher-income earners will see no direct relief. However, the top tax brackets might gain indirectly from lower slab rates.
Members criticized the lack of meaningful relief, especially for low- and middle-income earners. They also questioned new tax measures, including a 2% withholding tax on cash-on-delivery transactions. The committee urged raising the cash withdrawal limit for withholding tax from Rs50,000 to Rs75,000 to ease the burden on small earners and pensioners.
In related news, Langrial admitted that the 3% federal excise duty on immovable property was a “theoretical mistake and unjust.” He confirmed the government plans to remove this duty in the upcoming budget to provide some relief to taxpayers.