FINALLY, some clarity. After the confusion created over the applicable rate on the lowest income tax bracket due to last-minute changes in the budget, the prime minister has now announced that those earning between Rs50,000 to Rs100,000 per month will be taxed at 1pc of the amount in excess of Rs50,000, not 2.5pc. It may be recalled that on the day the budget was unveiled, the finance minister, during his speech, had said the income tax rate on this bracket was being slashed from 5pc to 2.5pc as a ‘relief measure’. However, the Finance Bill 2025, released shortly after his speech, stated that the rate would be 1pc. When queried about this discrepancy during the post-budget press conference, the minister had affirmed the higher rate announced during the speech as the rate applicable, explaining that the PM’s last-minute decision to raise government employees’ salaries by 10pc instead of 6pc, as had been budgeted, had to be adjusted somewhere.

While the finance minister understandably felt constrained to balance the budget, one wonders why the first instinct was to let the burden of the government’s more-than-budgeted pay bump for civil servants fall on taxpayers who are already struggling to make ends meet. It seems the government finally realised that it may be adding insult to the salaried class’s injuries by taking away part of the admittedly meagre relief it had budgeted for them and giving it to the civil servants instead. The question of where the money for the latter’s pay raise will come from remains. Meanwhile, further adjustments are being made to the budget recommendations to make them more palatable to those who will ultimately pass the Finance Bill. The finance minister has repeatedly warned that the space he has to manoeuvre is extremely limited. One hopes the taxman’s hands will not yet again reach for those already in his snare.

Published in Dawn, June 20th, 2025