Your Salary Vs. The Budget: What’s Changing In 2025–26?

The new budget is here. Salaried workers across Pakistan are doing the math. Will the numbers help them breathe or tighten the belt again? The federal government has made changes. Some are calling it relief. Others call it a patch. Either way, it matters. Your paycheck matters.

Finance Minister Muhammad Aurangzeb announced the 2025–26 budget with big promises—growth, tax reform, and some “relief” for the salaried class. But let’s be real: things are tough. Inflation won’t slow down. Utility bills are rising. Groceries cost more. And your salary is being pulled in every direction. Let’s get to it.

What Changed for Salaried Workers

The government says it has good news. Salaried employees will pay less tax next year. But how much less?

Here’s a breakdown:

It sounds good on paper. The changes will help some people, especially those in the lower brackets. But this isn’t a game-changer. The relief is small when compared to rising prices.

Lower Tax Rates for the Middle Class

The government made cuts in tax rates for most salaried individuals. The lowest three tax brackets got the biggest break.

Here’s what changed:

• If you earn between PKR 600,001 and 1,200,000 a year, your tax drops from 5% to 1%.
• Between PKR 1.2 million and 2.2 million? Tax drops from 15% to 11%.
• Between PKR 2.2 million and 3.2 million? You now pay 23%, not 25%.

A person earning PKR 100,000 per month now pays just PKR 500 per month. That’s down from PKR 2,500. A clear win—on paper.

Still, this relief won’t stretch far in real life. With fuel, food, and rent rising, the gains vanish fast. It’s like trying to stop a flood with a paper towel for many.

Fixed Tax Cuts: The Hidden Wins

Besides lowering rates, the budget also reduced the “fixed” tax portions.

Here’s how that works:

• A worker earning PKR 1.5 million/year paid PKR 30,000 fixed tax last year. Now, it’s only PKR 6,000.
• Those making PKR 3 million/year saw their fixed tax drop from PKR 180,000 to 116,000.

These hidden cuts make a real difference. They increase your take-home pay quietly.

But again, don’t expect miracles. Inflation eats through that extra income before the month ends.

Why The Relief Feels Smaller Than It Is

It’s strange. The budget gives, yet it doesn’t feel generous. Why?

Here’s why the relief feels hollow:

• Inflation is eating into wages faster than the relief comes in.
• Digital taxes and levies have gone up quietly.
• Bank interest, dividends, and cash withdrawals are taxed more now.

The finance ministry says it’s trying to balance things. But it’s clear. The working class still pays more than others—especially traders and retailers who often avoid taxes altogether.

Pay Raise or Not: You Still Lose

Federal workers got a 10% salary rise and 7–10% in pensions. That sounds fair, right? But here’s the problem. Prices have gone up far more than 10%. Electricity bills. Grocery prices. School fees. They’re all rising faster than your income.

A small raise won’t cover a big gap. For most, the math still ends with less money at the end of the month. And for private sector employees, there’s no raise at all—just hope.

The Bigger Picture: Who Still Isn’t Paying Taxes?

Here’s a sad truth. Over 98% of Pakistanis still don’t pay income tax, according to official records. That’s almost the entire country. Who pays the most? The salaried class.

Reports show salaried workers contribute nearly PKR 331 billion in taxes—five times more than retailers and exporters combined. This budget gives a little relief but doesn’t fix the big problem: unfair tax distribution. The salaried class carries the weight while others walk free.

Extra Costs: The Silent Burdens

Relief in one place often means a burden in another. That’s what happened here.

Some extra costs that now apply:

• 0.8% tax on cash withdrawals (raised from 0.6%)
• 2% tax on digital payments
• Sales tax on imported food items like chocolates and pet food

The government rolled back the Excise Duty on property but tightened rules elsewhere. So, while your salary tax may fall, other hidden taxes bite harder.

Real Relief or Just a Pause?

There’s no denying it—the tax changes in the 2025–26 budget offer small wins. For some, it might feel like a breather. But this isn’t real reform. The basic tax exemption limit—PKR 600,000/year—didn’t change. Inflation keeps rising. And tax cuts won’t fix that. New digital taxes, service levies, and indirect costs hurt more over time.

This budget needed to be bolder. It could have raised the exemption threshold. It could have brought the agriculture and retail sectors into the fold. But it didn’t. So where does that leave us? You’ll save a little. But you’ll spend more. The middle class, once again, survives but doesn’t grow. And your salary? It may look bigger—but it still feels smaller.