The Federal Budget 2025-26 was presented by the Finance Minister on June 10, 2025, bringing significant relief for government employees and pensioners. The government has announced a 10% salary increase, enhanced pensions, and introduced new allowances to support employees amid rising inflation. Additionally, salaried individuals will benefit from reduced income tax rates, making this budget a welcome relief for many.
Let’s break down the key announcements and what they mean for government employees and pensioners.
Salary Increase for Government Employees (2025-26)
The Federal Cabinet initially approved a 6% salary hike, but after review, the Prime Minister increased it to 10% of the basic pay. This raise applies to all federal government employees and is expected to help offset inflation and rising living costs.
Key Allowances & Benefits
Disparity Reduction Allowance (DRA) – Increased to 30% of basic pay for eligible employees.
Special Conveyance Allowance – Raised from Rs. 4,000 to Rs. 6,000 per month (specifically for disabled employees).
However, there was no increase in House Rent Allowance (HRA) or regular Conveyance Allowance, which has disappointed some employees.
Pension Increase for Retired Employees
Pensioners have also received relief in this budget:
Pension increased by 7% (as per the initial cabinet approval).
Later, the Prime Minister approved an additional raise, bringing the total increase to 10%.
This enhancement will help retired employees cope with rising expenses, particularly in healthcare and daily necessities.
Major Tax Relief for Salaried Individuals
The 2025-26 budget brings significant tax cuts for salaried persons, reducing the financial burden on middle and lower-income groups.
Revised Income Tax Slabs (2025-26)
| Annual Income | Old Tax Rate | New Tax Rate |
|---|---|---|
| Rs. 600,000 – 1,200,000 | 5% | 2.5% |
| Up to Rs. 1,200,000 | Rs. 30,000 tax | Rs. 6,000 tax |
| Up to Rs. 2,200,000 | 15% | 11% |
| Higher salaries | Previous rates | Reduced rates |
This change will increase take-home salaries for millions of employees, providing much-needed financial relief.
Pension Reforms: What’s Changing?
The government has introduced several pension reforms to streamline the system and reduce fiscal burdens:
Family pension period limited to 10 years (previously extended for life in some cases).
Elimination of multiple pensions (employees can no longer receive more than one pension).
Early retirement restrictions – Reducing benefits for those retiring before 60 years of age.
Only one option (pay or pension) – If a retired employee takes another government job, they must choose between salary or pension.
These reforms aim to make the pension system more sustainable in the long run.
Will There Be Revised Pay Scales in 2025?
Many employees were expecting new pay scales with the merger of Ad-hoc Relief Allowances (ARA) into basic pay. However, the budget speech did not mention any revision in pay scales.
Key Points:
If pay scales are revised later, how will DRA-2025 and ARA-2025 be adjusted?
Will allowances be recalculated based on the new pay structure?
The government has yet to clarify these details, leaving employees in suspense.
A Mixed Bag for Employees
The Budget 2025-26 brings positive changes, including:
✔ 10% salary increase for government employees
✔ Higher pensions (10% increase) for retirees
✔ Major tax cuts for salaried individuals
However, some expectations were not met, such as:
❌ No increase in HRA or regular conveyance allowance
❌ No mention of revised pay scales
❌ Stricter pension rules
Overall, the budget provides immediate relief, but employees will be watching for further clarifications on pay scales and allowances.
What Do You Think?
Are you satisfied with the salary and pension increases? What other changes were you expecting? Share your thoughts in the comments.
I am Fahad Munir, an experienced finance and prize bond analyst, provides reliable, up-to-date results, expert tips, and insights at BondResult.com to enhance your prize bond strategies
