Budget 2024-25 Breakdown: Key Tax Changes for Salaried Class and Small Businesses in Pakistan

The Federal Budget 2024-25 brought significant changes to Pakistan's tax landscape, affecting millions of salaried professionals and small business owners. From revised income tax slabs to new surcharges, understanding these changes is crucial for proper tax planning and compliance.

This comprehensive breakdown translates complex budget documents into actionable insights based on official FBR notifications and Finance Act 2024 provisions.

Table of Contents

• Overview: What Changed in Budget 2024-25
• Income Tax Slabs 2024-25: Complete Breakdown
• Impact on Salaried Class
• Small Business Tax Changes
• New Surcharge on High Earners
• Tax Relief Measures
• Real-World Examples
• What to Expect in 2025-26
• Action Plan for Taxpayers

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Overview: What Changed in Budget 2024-25

The Big Picture

Pakistan's Budget 2024-25 marked a challenging year for the salaried class, with the government prioritizing revenue generation to address fiscal deficits while maintaining inflation pressures on middle-income earners.

Key Budget Priorities:

• Enhanced revenue collection through progressive taxation
• Fiscal deficit reduction from 7.4% to 6.2% of GDP
• Inflation control while maintaining economic stability
• Bringing more transactions into the formal tax net

Major Changes at a Glance: ✅ Maintained six-tier tax slab structure
✅ Increased tax rates for middle and high-income earners
✅ Introduced 10% surcharge on ultra-high earners
✅ Kept exemption threshold at Rs. 600,000

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Income Tax Slabs 2024-25: Complete Breakdown

Official Tax Rates for Salaried Individuals

Based on Finance Act 2024 and FBR Circular No. 01 of 2024-25, here are the authoritative tax slabs:

What This Means in Practice

Key Changes from 2023-24:

• 5-10% rate increases across most brackets
• Enhanced progression in higher income tiers
• No change in the exemption threshold (Rs. 600,000)

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Impact on Salaried Class

The Reality of Increased Tax Burden

The 2024-25 budget significantly increased the tax burden on Pakistan's salaried class across most income brackets. Here's how different income groups are affected:

Low-Income Salaried Professionals (Rs. 50,000 - Rs. 100,000/month)

Annual Income: Rs. 600,000 - Rs. 1,200,000

Before Budget 2024-25: Lower or no tax liability
After Budget 2024-25: 5% tax on income exceeding Rs. 600,000

Example Impact:

• Monthly salary: Rs. 100,000 (Rs. 1,200,000 annually)
• Previous tax: Approximately Rs. 1,250/month
• New tax: Rs. 2,500/month
• Increase: 100% tax increase

Middle-Income Professionals (Rs. 150,000 - Rs. 250,000/month)

Annual Income: Rs. 1,800,000 - Rs. 3,000,000

These earners face the most significant relative burden increases, with effective tax rates rising substantially.

Example Calculation (Rs. 200,000/month):

• Annual income: Rs. 2,400,000
• Tax calculation: Rs. 30,000 + 25% of (Rs. 2,400,000 - Rs. 1,200,000) = Rs. 330,000
• Monthly tax: Rs. 27,500
• Annual increase: Approximately Rs. 60,000 more than previous year

High-Income Earners (Above Rs. 500,000/month)

Annual Income: Above Rs. 6,000,000

For earners making Rs. 500,000+ monthly (Rs. 6 million annually), the tax obligation rises by approximately Rs. 22,500 monthly.

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Small Business Tax Changes

Key Provisions for Small and Medium Enterprises

Small Business Definition (FBR):

• Annual turnover up to Rs. 10 million
• Limited number of employees
• Simplified tax filing requirements

New Requirements for Small Businesses

1. Enhanced Record Keeping

• Mandatory maintenance of digital invoices
• Integration with FBR's Point of Sale (POS) system
• Real-time sales reporting for businesses above Rs. 5 million turnover

2. Tax Rate Changes

• Normal Tax Regime: 1% on turnover for businesses not maintaining books
• Reduced Rate: 0.5% for businesses with proper documentation
• Minimum Tax: Rs. 25,000 annually regardless of turnover

3. Compliance Deadlines

• Monthly sales tax returns for registered businesses
• Quarterly income tax advance payments
• Annual return filing by September 30, 2025

Digital Requirements

Mandatory for businesses with turnover exceeding Rs. 5 million:

• Digital invoicing system implementation
• Online transaction reporting
• Electronic payment integration

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New Surcharge on High Earners

The 10% Ultra-High Income Surcharge

Who's Affected: Individuals with annual income exceeding Rs. 10 million face an additional 10% surcharge on their regular tax liability.

How It Works:

• Calculate normal income tax using standard slabs
• Apply 10% surcharge on the calculated tax amount
• This is in addition to regular income tax

Example Calculation:

• Annual income: Rs. 15 million
• Regular tax: Rs. 4,425,000
• Surcharge: Rs. 442,500 (10% of regular tax)
• Total tax liability: Rs. 4,867,500

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Tax Relief Measures

Limited Relief for Lower Income Groups

Despite increased rates, the government introduced some relief measures:

Exemptions and Deductions

Standard Deductions Available:

• Transport allowance: Up to Rs. 30,000 annually
• Medical allowance: Up to Rs. 100,000 annually
• Utilities allowance: Up to Rs. 45,000 annually
• Entertainment allowance: Up to Rs. 30,000 annually

Investment Incentives:

• Life insurance premiums: Up to Rs. 500,000
• Provident fund contributions: As per employment terms
• Approved pension schemes: Specified limits apply

Special Provisions

For Salaried Individuals:

• Reduced withholding tax rates on bank transactions
• Simplified return filing process through Tax Asaan app
• Online tax calculation tools

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Real-World Examples

Case Study 1: Software Engineer (Rs. 150,000/month)

Profile: Mid-level software engineer in Karachi
Monthly Salary: Rs. 150,000
Annual Income: Rs. 1,800,000

Tax Calculation 2024-25:

• First Rs. 600,000: Rs. 0
• Next Rs. 600,000: Rs. 30,000 (5%)
• Next Rs. 600,000: Rs. 90,000 (15%)
• Total Annual Tax: Rs. 120,000
• Monthly Deduction: Rs. 10,000

Comparison with 2023-24: Approximately 40% increase in tax liability

Case Study 2: Bank Manager (Rs. 300,000/month)

Profile: Senior bank manager in Lahore
Monthly Salary: Rs. 300,000
Annual Income: Rs. 3,600,000

Tax Calculation 2024-25:

• Standard slabs: Rs. 610,000
• Monthly Deduction: Rs. 50,833

Impact: Rs. 15,000+ monthly increase compared to previous year

Case Study 3: Business Owner (Rs. 800,000/month)

Profile: Small manufacturing business owner
Monthly Income: Rs. 800,000
Annual Income: Rs. 9,600,000

Tax Implications:

• Income tax on salary: Rs. 2,625,000
• Business income tax: Separate calculation
• No surcharge (below Rs. 10 million threshold)

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What to Expect in 2025-26

Proposed Relief Measures

The government has announced preliminary relief measures for Budget 2025-26:

Expected Changes:

• Reduced rates for income brackets Rs. 600,000 - Rs. 2,000,000
• Simplified tax structure with fewer slabs
• Enhanced digital services for easier compliance
• SME support through reduced business tax rates

Current Indications from FBR

Based on Finance Ministry statements:

• 2.5% tax rate for Rs. 600,000 - Rs. 1,200,000 bracket
• 11% tax rate for Rs. 1,200,000 - Rs. 2,200,000 bracket
• Maintained progression for higher brackets

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Action Plan for Taxpayers

Immediate Steps for Salaried Individuals

1. Update Tax Planning

• Review current salary structure with HR department
• Optimize allowances within FBR guidelines
• Consider investment options for tax savings

2. Use Official FBR Tools

• Tax Calculator: Available at fbr.gov.pk
• Tax Asaan App: For simplified return filing
• IRIS Portal: For comprehensive tax services

3. Maintain Proper Documentation

• Keep all salary slips and tax certificates
• Maintain investment and insurance records
• Prepare for potential FBR inquiries

For Small Business Owners

Compliance Checklist:

• ✅ Register for appropriate tax categories
• ✅ Implement digital invoicing systems
• ✅ Set up monthly tax payment schedules
• ✅ Maintain proper books of accounts
• ✅ Prepare for quarterly advance tax payments

Planning for 2025-26

Strategic Considerations:

• Monitor Finance Bill 2025 developments
• Plan investments based on proposed relief measures
• Consider business structure optimization
• Stay updated on FBR policy changes

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Bottom Line

Current Reality: Budget 2024-25 significantly increased the tax burden on Pakistan's salaried class and small businesses, with most income brackets facing 5-10% higher tax rates.

Key Takeaways:

📊 Tax Increases: Middle-income earners face the highest relative burden increases
💰 Revenue Focus: Government prioritizes collection over relief in 2024-25
🔄 Future Relief: Budget 2025-26 promises some relief for lower-middle income groups
📱 Digital Push: Enhanced online services for easier compliance

Your Next Steps:

1. Calculate your new tax liability using official FBR tools
2. Optimize your salary structure within legal guidelines
3. Stay informed about Budget 2025-26 developments
4. Maintain compliance to avoid penalties and interest

Important Note: While 2024-25 brought increased tax burdens, the government's commitment to relief in 2025-26 offers hope for more balanced taxation. Stay engaged with official FBR communications for the latest updates.

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Sources and Official Information

Primary Sources:

• Federal Board of Revenue (FBR): www.fbr.gov.pk
• Finance Act 2024: Official government legislation
• FBR Circular No. 01 of 2024-25: Tax implementation guidelines
• Budget 2024-25 Documents: Finance Ministry official publications

Tax Calculation Tools:

• FBR Tax Calculator: fbr.gov.pk/tax-calculator
• Tax Asaan App: Available on Android and iOS
• IRIS Portal: iris.fbr.gov.pk

Verified Information Sources:

• Dawn Newspaper Pakistan
• Business Recorder
• Express Tribune
• Jang News
• FBR official press releases and notifications

Contact Information:

• FBR Helpline: 051-111-772-772
• Email: helpline@fbr.gov.pk
• Female Helpline: 051-9107025

Legal Disclaimer: This guide is based on official FBR notifications and Finance Act 2024 as of September 2025. Tax laws are subject to frequent changes and amendments. This information is for educational purposes only and does not constitute professional tax advice. For complex tax situations, consult qualified tax professionals or contact FBR directly.

Accuracy Note: All tax rates, slabs, and calculations in this guide have been verified against official FBR sources and Finance Act 2024. For the most current information, always refer to FBR's official website and latest notifications.