The middle class in both Pakistan and India often bears the brunt of tax policies, but the situation is far more challenging for salaried professionals in Pakistan. A direct comparison of tax structures between the two countries reveals that Pakistan’s middle-income earners face significantly higher tax rates on lower income brackets, while India provides more relief to its middle class.
Recent data highlights the stark disparity in tax policies. In India, individuals earning up to INR 1.2 million (approximately PKR 3.6 million) are completely exempt from income tax. In contrast, Pakistan only exempts incomes up to PKR 600,000 (around INR 200,000) from taxation. This difference alone places a heavier burden on Pakistan’s salaried class.
The gap widens further as income levels increase. For instance, individuals earning between INR 1.2 million and INR 1.5 million (PKR 3.6 million to PKR 4.5 million) in India are taxed at a flat rate of 15 percent. In Pakistan, however, the same income range is taxed at a much higher rate of 25 percent. Similarly, Indian taxpayers earning up to INR 2.5 million (PKR 7.5 million) pay 25 percent, while their Pakistani counterparts in the same bracket are taxed at 30 percent.
The maximum tax rate in India is capped at 30 percent for individuals earning over INR 2.5 million (PKR 7.5 million). In Pakistan, however, the highest tax rate of 35 percent applies to incomes exceeding just PKR 4.1 million (INR 1.36 million), a much lower threshold compared to India.
This disparity has left Pakistan’s middle class, particularly salaried professionals, struggling under a disproportionate tax burden. While India’s tax system is designed to provide relief to middle-income earners, Pakistan’s policies appear to be squeezing its middle class harder.
The situation in Pakistan is partly driven by the government’s efforts to increase tax revenues. Finance Minister Muhammad Aurangzeb has emphasized the need to boost revenue collection to reduce reliance on International Monetary Fund (IMF) bailouts. The Finance Division has set an ambitious target of raising Rs. 13 trillion by June 2025, focusing on various sectors, including the salaried class, retail, and export businesses. To ensure compliance, stricter measures against tax evasion have also been introduced.
Despite these efforts, the tax burden on Pakistan’s middle class remains a pressing issue. With higher rates applied to lower income brackets, salaried professionals in Pakistan are left with little financial breathing room, especially when compared to their Indian counterparts.
