The International Monetary Fund (IMF) and Pakistan are on the verge of reaching an agreement to reduce income tax rates for the salaried class in the upcoming 2025-26 budget.

Following intense negotiations between the IMF and the Federal Board of Revenue (FBR) on Friday night, the Fund has given broad approval to lower tax rates across several income brackets for salaried individuals. The proposed changes are expected to provide relief worth Rs. 56-60 billion in the next fiscal year.

According to FBR proposals, the tax rate on the first income slab (annual earnings between Rs. 0.6 million and Rs. 1.2 million) would drop from 5 percent to 1 percent, reducing the tax on income up to Rs. 100,000 from Rs. 30,000 to Rs. 6,000. However, the IMF is advocating for a compromise rate of 1.5 percent, which would set the tax at Rs. 9,000.

For higher income brackets, a reduction of 2.5 percent per slab is under discussion, along with a proposed cut in the top tax rate from 35 percent to 32.5 percent. Final figures are still being worked out between the IMF and FBR.

The IMF has also called for the gradual rationalisation of the 10 percent surcharge and Super Tax.