Key takeaways from Federal Budget 2025-26

Finance Minister Senator Muhammad Aurangzeb on Tuesday unveiled the Rs17.573 trillion "growth-oriented" federal budget for the fiscal year 2025-26.

Presenting the federal budget 2025-26 in the National Assembly, the finance minister highlighted that the budget for the upcoming fiscal year was the beginning of the strategy, especially chalked out to promote a competitive economy.

“It will help increase foreign exchange reserves, reduce the fiscal payment imbalances, thus promoting the overall economic productivity,” he said.

Here are some key takeaways from federal budget for FY26:

• Total budget outlay set at Rs17.573 trillion, down 7% from last year.
• Economic growth target set at 4.2%; fiscal deficit targeted at 3.9% of GDP.
• Debt servicing at Rs8,210 billion, nearly half of the total budget.
• Defence spending increased by 20.2% to Rs2550 billion, now 1.97% of GDP.
• Tax collection target set at Rs14.131 trillion, an 18.7% increase.
• FBR’s tax-to-GDP ratio raised to 10.4%, with a historic 1.6% increase in one year.
• Salaried class tax relief introduced; new slabs starting from 2.5% for Rs0.6m-Rs1.2m income.
• Super tax on corporations (Rs200m-Rs500m) reduced to 5%.
• 18% tax proposed on imported solar panels, digital platforms, petrol/diesel/hybrid cars.
• Federal PSDP allocation reduced by 20% to Rs1.354 trillion, while provincial PSDP increased by 36.9% to Rs2.869 trillion.
• Non-tax revenue target fixed at Rs5.15 trillion.
• Pension hike of 7% for retired employees; 10% salary increase for Grade 1–22 employees.
• IT exports reached $3.1 billion, target set at $25 billion in 5 years.
• Overall expenditures of federal government estimated at Rs17,573 billion.
• Rs1,186 billion allocated for subsidies on electricity, and other sectors.
• Educational scholarship programme to be expanded and Rs12 million children will be benefited.