Pakistan Vs India: Comparing the tax burden on their middle class
Tax systems are significantly different between Pakistan and India. Both are putting a tremendous burden of taxation on their respective middle classes. More often, it excludes middle classes from availing most benefits.
However, Pakistan’s middle class bears even a greater\ load of taxes.
A recent comparison between the two countries shows that Pakistani taxpayers are taxed at higher rates even on lower incomes. In contrast, India offers more relief to its middle-income earners.
Last year, Pakistan’s Finance Minister Muhammad Aurangzeb had warned that the country needed to enhance tax revenue and reduce dependence on IMF loans. The government targets Rs. 13 trillion in collections by June 2025, mainly through salaried professionals, retail, and exports. New measures to check tax evasion have also been put in place to ensure proper tax collection.
In India, people earning up to INR 1.2 million (PKR 3.6 million) are exempt from income tax, whereas in Pakistan, only those earning up to PKR 600,000 (INR 200,000) are tax-exempt.
The gap remains to be more pronounced. Those Indians who fall between INR 1.2 million and INR 1.5 million (PKR 3.6 million to PKR 4.5 million) pay a flat 15% tax, whereas the Pakistanis falling in the same income range are taxed at 25%. Those earning up to INR 2.5 million (PKR 7.5 million) face a 25% tax, which is even more for the Pakistanis who face a 30% tax.
Once income reaches more than INR 2.5 million or PKR 7.5 million in India, the maximum tax rate is 30%. However, in Pakistan, every earning above PKR 4.1 million (INR 1.36 million) is taxed at 35%.
In a nutshell, the middle class in Pakistan, especially the salaried class, pays much more in terms of taxes as compared with its Indian counterparts. While India’s taxation system provides much relief to its middle-class, Pakistan’s policies continue heaping heavy burdens on its salaried class.
