ISLAMABAD: The federal government has announced major tax relief measures in the budget for FY2025-26, including a reduction in General Sales Tax (GST) on imported solar panels and a cut in income tax for the salaried class.
Finance Minister Muhammad Aurangzeb made the announcements on Saturday while wrapping up the debate on the Finance Bill 2025-26 in the Senate. Among the key measures was a reduction in GST on imported solar equipment from 18% to 10%.
He said the earlier tax proposal aimed to support local industry and promote investment in solar technology. However, following consultations with lawmakers, the rate has now been revised down. The reduced 10% GST will apply to 46% of imported components, while the tax impact on solar panel plates is expected to cause only a 4.6% price increase.
“With this measure, the price of solar panels will increase by 4.6%,” Aurangzeb said. He also warned solar equipment dealers against price manipulation:
“It is condemnable that these opportunistic actors have artificially increased prices even before the proposed measure has come into effect. I strongly warn such elements that the government will take every possible step in the public interest.”
Income tax relief was another major highlight of the budget. Individuals earning between Rs600,000 and Rs1.2 million annually will now pay just 1% in income tax, down from the previously proposed 2.5%.
“This is the segment that endures inflation and pays taxes,” the finance minister said.
“We hope this step will not only increase compliance but also restore their confidence in the tax system.”
Aurangzeb confirmed that government employees will receive a 10% increase in salaries, while pensions for retired staff have been raised by 7%.
He also underlined that no mini-budget was introduced during the outgoing fiscal year, and that the government kept federal expenditure growth to just 1.9%, a sharp drop from the 10–12% seen in earlier years.
The minister further noted that the budget of the Benazir Income Support Programme (BISP) has been enhanced to Rs716 billion, up from Rs592 billion, to aid vulnerable families across the country.
Aurangzeb praised the Senate Standing Committee on Finance for its recommendations, adding that 50% of their proposals will be incorporated into the final budget.
The Finance Bill 2025-26 is now in the final phase of legislative approval, as the Senate concluded its debate and forwarded recommendations to the National Assembly.