The federal government has proposed a new income tax structure for salaried individuals as part of the draft Finance Bill for the fiscal year 2025–26. The proposed changes introduce six tax brackets, aiming to revise how income tax is applied across different salary levels.
As per the draft, people earning up to Rs. 600,000 annually will not have to pay any income tax, keeping lower-income groups completely exempt. For those earning slightly more between Rs. 600,001 and Rs. 1.2 million a year a minimal 1% tax will apply, but only on the income above Rs. 600,000.
The third income group includes individuals earning between Rs. 1.2 million and Rs. 2.2 million per year. In this case, a fixed tax of Rs. 6,000 will be charged, plus an additional 11% on the income above Rs. 1.2 million.
Those falling in the Rs. 2.2 million to Rs. 3.2 million range will face a fixed tax of Rs. 116,000, along with a 23% tax on the extra amount above Rs. 2.2 million.
The fifth category covers annual earnings between Rs. 3.2 million and Rs. 4.1 million. Salaried individuals in this bracket would pay Rs. 346,000 in fixed tax, plus 30% on the amount that exceeds Rs. 3.2 million.
Finally, individuals earning above Rs. 4.1 million annually fall into the highest bracket. They would be charged a fixed amount of Rs. 616,000, and 35% tax on any income beyond Rs. 4.1 million.
This proposed structure is part of a broader plan to balance tax collection with income levels, offering relief to low-income earners while increasing tax rates for higher-income groups.
