Government Opts Not to Tax Pensions in FY25 Budget

ISLAMABAD: The government decided not to accept the proposal to tax pensions for the fiscal year 2024-2025.

Guided by the International Monetary Fund (IMF), Pakistan has made several changes to its fiscal policies, including the sale of state-owned enterprises and initiatives to digitize processes to expand the tax base and boost revenue.

The Federal Board of Revenue (FBR) had proposed a 10 percent tax on pensions exceeding Rs100,000 per month in the Finance Bill 2024. However, the government ultimately decided to discard this proposal.

Instead, the government instructed tax authorities to explore alternative revenue measures to avoid taxing pensioners.

This decision came after virtual discussions between senior tax officials, the IMF, and Pakistani authorities on budget proposals. During these talks, the government conveyed its stance on not taxing pensions while also discussing uniform taxation for both business and salaried classes.

Finance Minister Muhammad Aurangzeb successfully persuaded the IMF to exclude monthly pension taxation from the upcoming budget.

Negotiations with the IMF are ongoing, with further virtual discussions on tax proposals planned. Meanwhile, the government remains focused on presenting a comprehensive budget plan.

The government previously assured the public of providing relief in the upcoming budget, despite challenges such as floods and global economic conditions, and emphasized the nation’s progress toward development.

The government also anticipated a decline in the inflation rate, citing significant reductions in food inflation and a 30 percent increase in tax collection in the current fiscal year.

Pakistan is set to unveil its annual budget on June 10, following a brief postponement from the original date of June 7.