Federal Government Announces Salary and Pension Hikes, Income Tax Reforms

Strategic Insights -

The federal government has notified a 10 percent increase in salaries for its employees, including personnel from the armed forces and civil armed forces, as approved in the 2025-26 budget. This hike also includes a 10 percent increase in pensions for government employees. The Ministry of Finance has issued separate notifications, granting a 30 percent disparity allowance to employees who were previously not receiving this benefit. These changes are set to take effect from July 1, 2025.

Key Takeaways:

  • The federal government has approved a 10 percent increase in salaries for its employees, including personnel from the armed forces and civil armed forces.
  • A 10 percent hike in pensions for government employees has also been approved in the 2025-26 budget.
  • A 30 percent disparity allowance will be granted to employees who were previously not receiving this benefit.
  • The new income tax slabs for the salaried class under the 2025-26 budget provide exemption or reduced tax rates for individuals earning up to Rs2.2 million annually.
  • The updated income tax slabs include a fixed tax amount for individuals earning between Rs1.2 million and Rs3.2 million, with additional 23-30% tax on income above Rs2.2 million.
  • The tax reforms are aimed at improving income distribution and providing relief to government employees.
  • The salary and pension hikes, along with the updated income tax slabs, will be effective from July 1, 2025.

Statistics:

  • 10 percent increase in salaries for government employees.
  • 10 percent hike in pensions for government employees.
  • 30 percent disparity allowance for previously ineligible employees.
  • 10% tax on income exceeding Rs600,000 for individuals earning between Rs600,001 and Rs1.2 million.
  • Fixed tax of Rs6,000 apply for individuals earning between Rs1.2 million and Rs2.2 million.
  • 23% tax on income above Rs2.2 million for individuals earning between Rs2.2 million and Rs3.2 million.
  • Fixed tax of Rs346,000 applies to individuals earning between Rs3.2 million to Rs4.1 million.
  • 35% tax on income above Rs4.1 million for individuals earning over Rs4.1 million.

Sources:

  • Ministry of Finance
  • Government of [Country Name]
  • (Public Announcement)