Tax relief for salaried class on cards as finance ministry tasked to work out options

Prime Minister Shehbaz Sharif-led government is mulling over options to provide income tax relief to the salaried class as he has assigned this special task to his economic team, Geo News reported citing sources within the finance ministry.

The development came as the coalition government comes under increasing pressure amid the ongoing sit-in by the Jamaat-e-Islam (JI) in Rawalpindi against inflated electricity bills and high taxes.

Addressing the federal cabinet meeting earlier today, Prime Minister Shehbaz Sharif said that coalition government's agenda is to reduce electricity bills to provide relief to the masses. However, he stressed that the issue should not be politicised.

The official sources told Geo News earlier today that the coalition government is mulling different options to reduce direct tax for those salaried individuals earning up to Rs100,000 per month and

The sources further said that relief worth Rs40 billion will be provided to the salaried individuals falling in the low-income group and added that officials are discussing the option to divert funding from the development budget to provide relief to the salaried class.

The sources said that the International Monetary Fund (IMF) would also be taken into confidence over the proposed relief.

The National Assembly passed the national budget on June 28 with a challenging tax revenue target of 13 trillion rupees ($46.66 billion) for the year starting July 1, up about 40% from the current year, to strengthen the case for a new rescue deal with the IMF.

The rise in the tax target is made up of a 48% increase in direct taxes and a 35% hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by 64%.

The tax would increase to 18% on textile and leather products as well as mobile phones besides a hike in the tax on capital gains from real estate. Workers will also get hit with more direct tax on income.

However, the general Consumer Price Index (CPI)-based inflation was recorded at 11.1% on year-on-year basis in July 2024, down from 12.6% in June 2024 and 28.3% in the corresponding month last year, according a data released by the Pakistan Bureau of Statistics (PBS) on Thursday.