ISLAMABAD: The International Monetary Fund (IMF) has agreed to two major demands from Pakistan regarding the upcoming fiscal year’s budget: an increase in the defence budget and tax relief for the weighed down salaried individuals.
According to sources, the government requested the IMF to acknowledge that the rising defence needs of the country could not be postponed. In response, the IMF accepted Pakistan’s defence priorities and agreed to a necessary increase in the defense budget.
Sources also revealed that the government achieved a significant breakthrough in securing income tax relief for the salaried class.
The tax rates will be reduced across all income slabs for salaried individuals.
It is worth noting that Federal Finance Minister Muhammad Aurangzeb had earlier stated that the budget would include full support for the Pakistan Armed Forces, emphasising that it is not just a military need but a national necessity.
Sources further explained that Section 129 of the Income Tax Act relates to tax concessions. The IMF has agreed to raise the annual income threshold for tax-free earnings from Rs600,000. Under the upcoming budget, the monthly tax-free salary limit could rise from Rs50,000 to Rs83,000.
For example:
• A monthly salary of Rs100,000 could see a reduced tax rate from 5% to 2.5%.
• A salary of Rs183,000 could face a tax cut from 15% to 12.5%.
• A monthly salary of Rs267,000 may see the tax rate lowered from 25% to 22.5%.
• For salaries up to Rs333,000, the rate may drop from 30% to 27.5%.
• For salaries exceeding Rs333,000 per month, the tax rate may be reduced by 2.5%, down to 32.5%.
Sources also confirmed that the IMF has been assured that all other targets will be met according to its conditions and that the upcoming economic review benchmarks will be implemented on time.
The IMF agreed to Pakistan’s requests for increasing the defence budget and providing tax relief to the salaried class after receiving assurances regarding the implementation of economic performance targets and future reforms.
