Govt targets Rs 650bn through enforcement, offers tax relief to salaried class and property sector

The federal government has unveiled enforcement measures worth Rs650 billion for fiscal year 2026-27 to help achieve the ambitious tax collection target of Rs15.264 trillion, while also announcing a series of tax policy changes and relief measures through the Finance Bill 2026.

Briefing journalists on the key features of the budget, FBR Member Strategic Transformation Dr Hamid Attique Sarwar said the tax revenue target for the next fiscal year had been set at Rs15.264 trillion, taking into account projected economic growth and inflation. He said a substantial portion of the additional revenue would come from enforcement measures and policy initiatives aimed at broadening the tax base and improving compliance.

According to Dr Hamid, the government expects to generate significant revenue through higher Federal Excise Duty (FED) on luxury vehicles, taxation of products such as naphtha and solvent oil, and the imposition of sales tax on the basis of printed retail prices for 21 categories of goods. The latter measure alone is expected to generate around Rs50 billion in additional revenue.

Describing the budget as a pro-growth package, he said the government had proposed relief measures for exporters, large businesses and the salaried class. These include a reduction in Super Tax, revisions to income tax slabs for salaried individuals, lower withholding taxes on property transactions, rationalization of FED on international business-class travel and a reduction in withholding tax on international card payments.

The government has proposed substantial relief for salaried taxpayers and plans to abolish the existing 10 percent surcharge. Under the revised tax structure, the tax rate on annual income between Rs2.2 million and Rs3.2 million has been reduced from 23 percent to 20 percent. Similarly, the rate for income between Rs3.2 million and Rs4.1 million has been lowered from 30 percent to 25 percent, while the rate for income between Rs4.1 million and Rs5.6 million has been reduced from 35 percent to 29 percent. For annual income ranging from Rs5.6 million to Rs7 million, the tax rate has been cut from 35 percent to 32 percent. The tax rate for income exceeding Rs7 million will remain unchanged at 35 percent.

In an effort to revive the real estate sector and encourage investment, the government has proposed reductions in withholding taxes on property transactions. For tax filers, the withholding tax on the sale of property under Section 236C has been proposed at 2.75 percent, while the withholding tax on the purchase of property under Section 236K has been proposed at 1.25 percent.

The government has also significantly reduced FED on international business-class air travel, arguing that the previous rates discouraged passengers from purchasing tickets within Pakistan. Under the revised structure, FED on travel to North, Central and South America has been reduced from Rs350,000 to Rs50,000. For the Middle East and Africa, the duty has been lowered from Rs105,000 to Rs25,000, while passengers travelling to Europe, the Far East and Australia will now pay Rs40,000 instead of Rs210,000.

The budget proposes higher taxes on luxury vehicles as well. Imported electric vehicles valued between Rs20 million and Rs30 million will be subject to a 30 percent FED, while imported EVs worth more than Rs30 million will face a 40 percent FED. Likewise, vehicles with internal combustion engines ranging between 2,000cc and 3,000cc will be taxed at 70 percent, while those exceeding 3,000cc will attract an 81 percent FED.

Dr Hamid said the government also intends to eliminate the tax disparity between industrial and commercial imports. Under the proposed regime, commercial importers will be subject to income tax ranging from 3 percent to 6.5 percent, in addition to 18 percent sales tax and an additional 3 percent sales tax.

Tax rates on various service sectors have also been revised. Independent professional services, including doctors and lawyers, will be taxed at 15 percent. Terminal and port services will face a tax rate of 12 percent, while other services will be taxed at 14 percent. Courier services, logistics companies, hotels, transport operators, air cargo services, car rental businesses, HR outsourcing firms and oil drilling services will be taxed at 7 percent.

The government has also proposed relief under the Super Tax regime for businesses, excluding banks, fertilizer companies and exploration and production firms. Under the proposal, Super Tax will be abolished on income slabs up to Rs500 million, while the rate for eligible businesses will be reduced from 10 percent to 8 percent.

Meanwhile, the Finance Bill 2026-27 introduces a special taxation framework for social media content creators. Individuals earning income through advertisements, sponsorships, audience engagement and other forms of online monetization will be taxed under the new regime. The proposed rules allow content creators to deduct expenses of up to 30 percent of their total revenue before calculating taxable income.

The government has also increased the FED on e-liquids used in electronic cigarettes from Rs10,000 per kilogram to Rs16,500 per kilogram. At the same time, it has abolished the retail-price-based tariff structure that previously imposed duties of up to 65 percent.