The Federal Government of Pakistan recently announced its budget for the year 2023, with the Federal Board of Revenue (FBR) setting a revenue target of 6,000 billion rupees. The new budget includes several changes in taxation policies that will have an impact on individuals and businesses across the country. In this article, we will discuss some of the salient features of the budget and how they may affect Pakistani taxpayers.
Increase in Income Tax Threshold
The income tax threshold has been increased to 1.2 million rupees, which was abolished by the previous government but has now been implemented again through the new budget. This means that individuals earning up to 1.2 million rupees annually will be exempt from income tax.
Increase in Government Salaries
The government has announced an increase in salaries for its employees by 15%, which will be a welcome relief for them.
Custom Duty Abolished on Pharmaceuticals
Custom duty has been completely abolished on more than 30 pharmaceutical products, which is expected to reduce the cost of medicines for consumers.
Increase in Tax on Banking Sector
The banking sector will now be taxed at 42%, which is an increase from the previous rate of 39%. This may have an impact on the profitability of banks and could potentially result in an increase in banking fees.
Abolishment of Withholding Tax on Film Distributors
Withholding tax has been abolished on film distributors, which is expected to encourage the revival of the film industry in Pakistan.
Increase in Withholding Tax on Vehicles
Withholding tax for non-filers will be increased by 200% on vehicles above 1600 cc, which is aimed at discouraging the import of luxury cars.
Reduction in Tax on Behbood Saving Certificates
Tax on Behbood saving certificates will be dropped to 5% from the current rate of 10%, which is expected to encourage more people to invest in these savings schemes.
Tax on Small Scale Retailers
Tax on small scale retailers is proposed to be fixed at a rate of 3000 to 10,000 rupees, which will be collected along with the electricity bill. This is expected to increase revenue collection and bring small businesses into the tax net.
Withholding Tax on Foreign Remittance
Withholding tax on foreign remittance through credit or debit card will be 1% for filers and 2% for non-filers, which is expected to encourage people to file their tax returns.
Sales Tax on Agriculture Machinery and Seeds
The government will abolish sales tax on agriculture machinery and seeds, which is expected to reduce the cost of farming for farmers.
Increase in Pension
The budget proposes a 5% increase in pension for retirees, which will provide relief to those who rely on pensions as their source of income.
Advanced Tax on Purchase of Property
Advanced tax on the purchase of property will be increased to 2% for filers and 5% for non-filers, which is expected to discourage speculative investments in the real estate sector.
Capital Gain Tax on Sale of Immovable Property
Capital gain tax on the sale of immovable property will be 15%, and after 6 years, it will be reduced to 0%. This is expected to encourage long-term investment in the real estate sector.
Tax on Movable Property
If a person holds movable property worth Rs 25 million, then 5% of it will be treated as their income, and they will be charged 1% tax on it.
Conclusion
In conclusion, the budget 2023 has some significant changes that will impact the taxation system in Pakistan. The government has set a revenue target of rupees 6000 billion, and various changes have been made to income tax, custom duty, and other areas of taxation. It is essential for Pakistani citizens to be aware of these changes to ensure they comply with the law and take advantage of any benefits that may be available to them. As always, it is important to consult with a tax professional for personalized advice on how these changes may affect your individual situation.
