Following an agreement with the International Monetary Fund (IMF), the federal government announced a 10% raise for government employees in Budget 2025-26. A sigh of relief is heard by thousands of public sector workers whose wages are rising.
Inflation has continued to bite, and employees have requested more financial support. The 10% increase in basic pay is a step towards easing the financial pressures, even if many had hoped for a higher raise. A tax relief program for salaried individuals and professionals, such as teachers, is also under discussion by the government. A report suggests that educators are eligible for up to 25% tax exemptions, so their monthly earnings can go a bit further.
Salary Increase for Government Employees in Budget 2025-26
An IMF approval followed careful negotiations that aimed to balance fiscal discipline and social support. Despite the IMF’s emphasis on reducing government expenses, it permitted this modest salary increase to help employees cope with the ongoing economic crisis.
Currently, the inflation rate is in the double digits, which should affect salary and allowance increases. Employee unions, especially in lower grades, have sought a minimum salary of Rs50,000 a month, although the percentage has not been officially disclosed.
Government Proposes Cracking Down on Cash Transactions
Moreover, the government plans to introduce significant fiscal reforms in an effort to reduce tax evasion and fuel adulteration by discouraging cash-based transactions.
Sources in the Federal Bureau of Revenue indicate that the Finance Bill 2025 will likely contain the following proposals:
- If fuel is purchased in cash at petrol pumps, an additional charge of Rs3 may apply. A significant reduction in tax evasion and adulteration is likely to result from this.
- Taxes charged on cash sales could be increased by 2% for manufacturers and importers.
- There may be additional taxes applicable to cash purchases at Tier-1 retailers, but restaurants stay exempt from such taxes.
Non-filers and Car Buyers Will Pay Higher Taxes
Those who do not file taxes are also expected to be hit harder by the budget. Cash withdrawals by non-filers will be subject to an increase in withholding tax of 1.2%. A new tax slab could also be introduced for daily cash withdrawals exceeding 50,000, helping to encourage people to move to digital payment methods.
In another shocker, the General Sales Tax (GST) on locally manufactured automobiles with engines under 800cc may be raised from 12.5% to 18%. A segment that used to be affordable for average buyers may no longer be as accessible.
Several Professions Are Not Eligible for Tax Net Expansion
The new budget excludes doctors, lawyers, jewelers, wedding hall owners, and event managers from the formal tax net, contrary to expectations. Some may be shocked at this decision, especially those who advocate reforming the tax base broadly.
Incentive Programs for Development and Investment
The government appears committed to raising development expenditures despite the heavy tax proposals. The focus is on infrastructure, energy transition, and public transport, including electric vehicle incentives.
The tax would be imposed over a five-year period to encourage the adoption of electric vehicles as part of environmental goals and energy security measures.
Latest News – IMF 10% Raise in Basic Pay in Budget 2025-2026
In the budget 2025-26, there is an update on salary increases for government employees. A salary hike for the government will be included in the coming Budget 2025-2026, conditionally approved by the International Monetary Fund (IMF).
As reported, the IMF wants the government to reduce its costs so that employees can benefit. In the case of pensioners receiving heavy pensions, they should pay tax on their monthly pensions. Upon announcing the Budget, the federal government will announce it on June 10, 2025.
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