Federal Budget 2025-26
Key Highlights and Implications for Government Employees and the Common Man
The Government of Pakistan has unveiled the Federal Budget for the fiscal year 2025–26, with a total outlay of Rs 17,600 billion. The budget focuses on balancing economic recovery, inflation management, and providing limited relief to the salaried class. It introduces several important decisions related to salaries, pensions, taxation, defense, energy reforms, and housing.
Below is a detailed breakdown of the major announcements and what they mean for government employees and ordinary citizens.
Salary Increases for Government Employees
The Pakistan Federal Budget 2025–26 has officially been announced and presented with a total outlay of Rs 17,600 billion. The federal budget 2025-26 announcement date was followed by a detailed presentation in the National Assembly. The government has emphasized economic reforms, modest relief for the salaried class, and new strategies to enhance tax compliance. The economic team, led by the Prime Minister, has approved a 10% increase in salaries for federal government employees and a 7% raise in pensions for retired personnel. These recommendations await final approval from the federal cabinet.
Federal Budget 2025-26 Presentation Date and Highlights
The federal budget 2025-26 presentation date was set for June 10, 2025, during which the Finance Minister shared detailed proposals for fiscal management, tax policy, and public sector compensation. The budget outlines plans to balance inflation control with development spending and defense allocations.
Proposals Considered:
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30% Disparity Allowance for employees in Grade 1 to 16.
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10% Inflation-Indexed Salary Increase for all employees.
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Merger of One Ad Hoc Relief Allowance into the basic salary.
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Separate 15% Salary Increase for officers in Grade 17 to 22.
Pension Reforms:
While the contributory pension scheme was to be implemented from July 1 for the armed forces, sources suggest its rollout may be delayed due to incomplete structuring. As a result, the armed forces are expected to remain exempt for now.
Income Tax Reforms: Some Relief for the Salaried Class
The Finance Minister has introduced modest income tax relief for the salaried class:
| Annual Income (PKR) | Previous Tax Rate | New Tax Rate |
|---|---|---|
| 600,000 – 1,200,000 | 5% | 1% |
| Up to 2,200,000 | 15% | 11% |
| 2,200,000 – 3,200,000 | 25% | 23% |
For example, an individual earning Rs 1.2 million annually will now pay Rs 6,000 in income tax instead of Rs 30,000.
