‘Non-Filers’ to Bear the Brunt as Income Tax Rates Drop

Islamabad (Web Desk) —  The government has introduced major tax changes in the 2025-26 federal budget. Low-income salaried people will get tax cuts up to 80%, while tax relief for higher earners will be limited to just 3%. A new 5% tax will be applied on pensions over Rs10 million per year.

The budget aims to balance support for different sectors, widen the tax base, share the tax burden fairly, and improve tax enforcement. The government expects new digital taxes, carbon taxes, and stronger rules on e-commerce and digital payments to help Pakistan meet international financial standards.

The Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial said tax reliefs worth Rs60 billion are planned for salaried workers, Rs2.4 billion for companies, and Rs60 billion in exemptions for fertilizers and pesticides.

The government plans to collect Rs14.131 trillion in taxes next year. Without new taxes or enforcement, revenue would reach Rs12.845 trillion. To meet the target, Rs1.05 trillion will come from new taxes and stronger enforcement.

Enforcement Measures:

• A new rule will limit buying vehicles, property, and securities to people who file income tax returns and can prove they have legal money.

• The FBR will share tax info of high-risk taxpayers with banks to help track suspicious transactions.

Salaried People:

• The monthly salary tax exemption stays at Rs50,000.

• Tax rates for incomes up to Rs3.2 million per year are lowered, giving big relief to low and middle-income earners.

• For example, people earning Rs600,000 to Rs1.2 million will pay just 1% tax instead of 5%, saving up to 80%.

• Tax rates and fixed amounts are reduced across several income brackets, meaning many will pay less tax.

• Higher earners (above Rs4.1 million) will see smaller relief, and those earning over Rs10 million get only a 1% surcharge reduction.

• Pensioners earning over Rs10 million annually will now pay 5% tax.

Other Key Points:

• Tax exemptions for former Fata and Pata regions extended to June 30, 2026.

• Withholding tax on property purchases has been lowered.

• Tax on interest income rises from 15% to 20%, but national savings are exempt.

• Rent on commercial properties must be reported at a minimum of 4% of market value.

Digital Economy:

• A new tax will apply to payments made through digital platforms, collected by banks and courier companies.

• Taxes on cash withdrawals by non-filers increase from 0.6% to 1%.

• Some service taxes have also been increased, while IT services are exempt.

Sales Tax Changes:

• An 18% sales tax will be applied to imported solar panels and hybrid cars.

• A 10% sales tax will be gradually introduced over five years in tax-exempt provinces.

• Banks and payment services will collect sales tax on digital payments.

• New sales taxes on pet food, chocolates, and cereal bars.

• Tax on vermicelli and sheermaal increased from 10% to 18%.

• Sales tax on buns and rusk has been removed.

• Industrial units in former Fata and Pata regions will now pay 18% sales tax on machinery and imports.