Don't wait until the last minute to file Tax Returns! Use coupon code EarlyBird on our store for 20% off on all of our services. Valid through July 31, 2026. Dismiss

Do you know?

The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. •

₨ 0

Do you know?

Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. •

Budget 2025–26: Complete Breakdown of Tax Measures, Revenue Targets, and Economic Policies in Pakistan

The Government of Pakistan, led by Finance Minister Muhammad Aurangzeb, has officially presented the Federal Budget 2025–26 in the National Assembly. With a total budget outlay of Rs. 17.6 trillion, this budget introduces major changes in Pakistan’s taxation structure, revenue policies, and economic governance model.

The Government of Pakistan, led by Finance Minister Muhammad Aurangzeb, has officially presented the Federal Budget 2025–26 in the National Assembly. With a total budget outlay of Rs. 17.6 trillion, this budget introduces major changes in Pakistan’s taxation structure, revenue policies, and economic governance model.

This article offers a comprehensive analysis of the Federal Budget 2025–26, highlighting all important tax changes, revenue targets, and fiscal priorities affecting businesses, salaried individuals, property owners, and the digital economy in Pakistan.

Federal Budget 2025–26 Key Figures

The total size of the federal budget has been set at Rs. 17.6 trillion, reflecting a 2 percent increase compared to the previous fiscal year. The major fiscal components are as follows:

Total Federal Budget Outlay: Rs. 17.6 trillion
Current Expenditure: Rs. 16.3 trillion
Defense Expenditure: Rs. 2.5 trillion
Federal Board of Revenue (FBR) Tax Collection Target: Rs. 14.1 trillion, representing a 19 percent increase year-on-year
Non-Tax Revenue Target: Rs. 5.1 trillion

These figures emphasize the government’s intent to improve domestic resource mobilization, reduce dependency on external borrowing, and expand the tax base in Pakistan.

Major Tax Reforms Introduced in the Budget 2025–26

The federal budget for 2025-26 marks a major shift in Pakistan’s taxation framework, focusing on digitalization, economic growth, and widening the tax base. From import tariffs to income tax, the budget introduces significant changes designed to boost revenue and support businesses.

The Government of Pakistan has unveiled its budget for 2025-26 with a comprehensive strategy aimed at enhancing tax compliance, facilitating trade, and aligning taxation with technological advancements. Below are the key tax-related highlights, simplified for readers of TaxationPk.

Customs Act 1969 – Boosting Trade and Efficiency

Tariff Restructuring: New slabs introduced (5%, 10%, 15%) and older ones abolished (3%, 11%, 16%) to simplify trade.
Duty Reductions: Additional customs duties reduced across thousands of tariff lines to encourage industrial imports.
Anti-Smuggling Tech: New digital enforcement units and cargo tracking systems will monitor goods movement in real-time.

Sales Tax Act 1990 – Embracing Digital Commerce

E-Commerce Tax Collection: Online marketplaces and payment intermediaries (e.g., banks, couriers) will now collect sales tax on digital and COD transactions. Withholding rate raised from 1% to 2%.
Tax Fraud Crackdown: The role of “abettors” in tax evasion is now defined and penalized. Clear distinction introduced between civil non-compliance and criminal fraud.
Tax on Imported Consumer Goods: Pet food, imported chocolates, and coffee in retail packs now taxable at retail price.
Exemptions Withdrawn: Concessions for solar panels and PV modules removed to promote fair competition with local industry.
Solar Panel Sales Tax: Tax on solar panels was proposed at 18%. Which was later approved by senate committee at 10%

Income Tax Ordinance 2001 – Digital, Transparent, and Targeted

1. Revenue Measures:

The government aims to significantly bolster its revenue through the following key proposals:

Digital Transactions Proceeds Levy: A new levy is introduced to tax domestic vendors involved in digitally ordered goods and digitally delivered services. Banks and courier services will act as withholding agents, ensuring the entire payment chain is captured.
Withholding Tax Rate Increase on Services:
- For specified services (excluding IT and IT-enabled Services), the withholding tax rate will increase from 4% to 6%.
- For other non-specified services, a flat 15% rate will be imposed.
- For sportspersons, the rate will increase from 10% to 15%.
Enhanced Banking Sector Assessment: Provisions for the assessment of banking companies have been made more disclosure-oriented, aiming to accurately determine their true income and tax payable.
Increased Tax on Profit on Debt & Dividends:
- Tax rate on profit on debt is proposed to increase from 15% to 20%.
- The dividend tax rate is enhanced to 25%, while dividends from mutual funds will be taxed at 15%.
Pension Income Taxation: Individuals under 70 years receiving pension income exceeding Rs. 10 million will be taxed at a flat rate of 5%. Pension income not exceeding Rs. 10 million remains tax-exempt (0%).
Increased Cash Withdrawal Tax for Non-Filers: The adjustable withholding tax rate on cash withdrawals by non-filers is proposed to increase from 0.6% to 0.8%. With daily limit enhanced to Rs. 75,000 and rate later approved at 1% for non filers.
Custodian of Debt Securities as Withholding Agent: Custodians of debt securities (excluding Sukuk bonds) are proposed to act as withholding agents to prevent tax evasion through coupon washing schemes.
Removal of Upper Cap on Profit on Debt (FTE): The Rs. 5 million upper cap on profit on debt under the final tax regime is proposed to be removed for individuals and Associations of Persons (AoP). For companies, the tax withheld will remain adjustable.
Property Taxes: Tax rates for filers on property buying and selling are proposed to be reduced by 1.5%. Wile for persons not appearing on ATL the rates on buying (236k) shall be reduced by 1.5% and increased by 1.5% for selling (236c) property.

2. Relief Measures:

Despite increased revenue ambitions, the bill also offers specific relief:

Super Tax Rate Reduction: Super tax rates under Section 4C are proposed to be reduced by half a percentage point for income slabs between Rs. 200 million and Rs. 500 million.
Salaried Individual Tax Rate Reduction: Tax rates for salaried individuals with income up to Rs. 3,200,000 have been reduced to provide relief to lower and middle-income brackets. The surcharge rate for salaried individuals is also proposed to be reduced from 10% to 9%.
FATA/PATA Exemption Extension: Income tax and withholding tax exemptions for erstwhile FATA/PATA areas are proposed to be extended for one year, up to Tax Year 2026.
Teacher and Researcher Rebate Restoration: A 25% rebate against tax payable by full-time teachers and researchers will be restored retrospectively, from Tax Year 2023 to Tax Year 2025.
Mortgage Tax Credit: A proportionate tax credit on profit on debt will be available for loans obtained for construction or acquisition of a house (up to 250 sq. yd.) or a flat (up to 2,000 sq. ft.).

3. Streamlining Measures:

These measures aim to simplify processes, enhance compliance, and curb tax avoidance:

Fair Market Rent Determination: The power of Inland Revenue Officers to determine Fair Market Rent (FMR) will be curtailed to commercial properties only. A flat 4% of the FMR (notified by the Board or Deputy Collector) will be considered the annual rental value for commercial properties, unless actual rent is justified with evidence.
Purchases from Unregistered Persons: Purchasers will be liable if buying from an unregistered person, leading to a 10% disallowance of purchase-related expenditure, shifting focus to the unregulated market.
Cash Payment Disallowance: 50% of purchase-related expenditure will be disallowed if payment is received in cash against a single invoiced sale transaction exceeding Rs. 200,000 by a vendor.
Depreciation Disallowance for Withholding Tax Default: Proportionate depreciation deduction will be disallowed for the tax year if the withholding tax is not deducted by the withholding agent. The disallowed amount will not become part of the written down value.
Business Loss Adjustment: No adjustment of brought forward accumulated business losses will be available to taxpayers in the first tax year and subsequent years under the Normal Tax Regime after switching from a prior applicable Final Tax Regime.
Amortization Period for Intangible Assets: The period of amortization for intangible assets with an undeterminable useful life has been reduced from 25 years to 15 years.
Coal Supply Scope Enhancement: Persons engaged in coal mining projects in Sindh can now supply coal to any sector of the economy, paying income tax on such supply, and can avail a 100% tax credit on supply to power generation projects.
Minimum Tax Carry Forward Reduction: The period for carrying forward and adjusting minimum tax on turnover has been reduced from three years to two years.
Assessment Amendment Limitation Period: The limitation period of 180 days for completing proceedings for amendment of assessment has been withdrawn.
Appeal Procedure Reversion: The appeal procedure before appellate forums has been largely reverted to the system in vogue prior to the Tax Laws (Amendment) Act, 2024.
Recovery Proceedings Restriction: Recovery proceedings for immediate payment can now only be initiated where decisions at both the Appellate Tribunal and High Court are against the taxpayer, providing a greater safeguard.
Board’s Condonation Power Restriction: The Board’s power to grant condonation has been restricted to an aggregate period of two years. In cases of huge revenue loss, an extension for a longer period is possible only after processing through a committee.
Group Relief Conditions: All entities in a group structure must now derive income chargeable under the Normal Tax Regime to avail group relief.
Non-Profit Organization Exemption Merged: Table (I) and Table (II) of clause (C66) of Part I of the Second Schedule, listing entities with complete exemption and exemption subject to 100C provision respectively, have been merged. Now, all entities require approval under 100C to be declared as a Non-Profit Organization and avail income exemption.
SEZ/STZ Exemption Restriction: Exemptions for Special Economic Zone (SEZ) and Special Technology Zone (STZ) entities and developers have been restricted to Tax Year 2035 or the expiry of a ten-year exemption period, whichever is earlier.

4. Procedural Measures:

These measures focus on data sharing and regulatory responsibilities:

Data Sharing by Online Platforms: All online marketplaces, payment intermediaries, and courier services will be required to file a statement to the Commissioner, sharing data of sellers involved in digitally ordered goods and digitally delivered services.
Online Marketplace Responsibility for Seller Registration: Online marketplaces are now made responsible for ensuring that all sellers using their platforms for e-commerce are registered.
Taxpayer Data Sharing: Sharing of taxpayer data with the Tax Policy Office (TPO) and anonymized data with international donors and recognized universities has been allowed.

These proposed changes reflect a comprehensive overhaul of Pakistan’s tax framework, aiming to adapt to the evolving economic landscape, improve compliance, and increase state revenues.

Federal Excise Act 2005 – Enforcement Gets Tougher

Counterfeit Goods: Strict penalties and confiscation for untaxed or fake goods like cigarettes and beverages.
Appeals Simplified: Taxpayers can directly approach tribunals, skipping initial appeals in some cases.
FED on Property Withdrawn: Excise duty on property allotments and transfers rolled back.

Sales Tax on Services (Islamabad)

Wider Coverage: Islamabad to move from a “positive list” of taxable services to a “negative list” system—broadening the tax net.
Real-time Integration: Service providers to be digitally linked with FBR for transaction-level tracking.

Final Thoughts from TaxationPk

The Budget 2025-26 is a step toward tax modernization and economic documentation. It aims to bring informal sectors into the tax net while offering relief to middle-class earners and promoting digital transparency. Whether you’re an individual taxpayer, business owner, or digital seller, understanding these changes is crucial to compliance and smart financial planning.

At TaxationPk, we’ll continue to break down these complex measures into practical insights to help you stay ahead.

For further updates, expert analysis, and sector-specific budget breakdowns, keep visiting TaxationPk and follow our dedicated news portal news.taxationpk.com.

Syed Babar

Articles: 51

3 Comments

Mansoor Ak

June 27, 2025 / 1:55 am Reply

Previous FY Budget was 18.77 trillion while current FY Budget is 17.57 trillion, representing a 6-7% decrease.
Arsalan

June 13, 2025 / 2:02 am Reply

What about the long awaited Agriculture taxation pushed by IMF. Instead of the govt doing it herself, IMF has to tell us the enormous tax gap in our collections for decades.
- Hayat Akbar
  
  June 13, 2025 / 3:50 pm Reply
  
  Agricultural income is already taxed at the same rates as individuals. However, that is taxed by provinces instead of Federal hence has nothing to do with Federal Budget. All the provnices already done this via their own acts, you can find details of agricultural income tax rates in Pakistan.