ISLAMABAD: The Federal Board of Revenue (FBR) is working on two key budget proposals for the next fiscal year (2025-26), which are expected to be presented to the prime minister for approval. The proposals include introducing a nominal tax on high pensions and increasing the income tax exemption threshold.
The first proposal targets pensions that exceed certain high thresholds, specifically for individuals receiving pensions of Rs0.4 million per month or Rs4.8 million per year.
These individuals, particularly retired Grade-22 officials, members of the judiciary, senior bureaucrats, and high-ranking military officers, may face a tax rate of 2.5 percent on their pensions. This measure aims to tax only those receiving substantial pension amounts while exempting lower-income pensioners.
The second proposal is aimed at increasing the current income tax exemption threshold of Rs0.6 million under the Income Tax Ordinance, 2001. According to these discussions, the current tax-free monthly salary limit may be enhanced from Rs50,000 to a little over Rs83,000. This adjustment is designed to provide relief to the general public by raising the exemption limit, thereby reducing the tax burden on lower-income individuals.
The FBR is currently finalizing these proposals, with the final decision on their implementation pending political approval.
