ISLAMABAD: The Federal Board of Revenue (FBR) has introduced major changes to Pakistan’s tax system in the Budget 2025–26.
These include adjustments for salaried individuals, new rules for property and digital transactions, and expanded enforcement powers.
Salaried persons will see a reduction in the surcharge rate from 10% to 9%. Those earning up to Rs. 3.2 million per year will get small tax relief.
Teachers and researchers will continue to receive a 25% tax rebate until 2025.
Pensioners under 70 years of age will now pay a 5% flat tax on pension income exceeding Rs. 10 million. Tax exemption on withdrawals from Voluntary Pension Schemes (VPS) has been removed.
A tax credit will be available for interest paid on low-cost housing loans. This applies to properties up to 2,500 sq. ft or flats up to 2,000 sq. ft. The credit can be claimed only once in 15 years.
Minimum rent on commercial property will be calculated at 4% of the FBR-assigned value. Businesses will not be allowed to adjust losses against property income in the same year.
For cash payments above Rs. 200,000 per invoice, 50% of expenses will be disallowed.
The budget introduces new measures to regulate digital commerce. Foreign-operated online platforms will be charged a 5% digital levy. Domestic digital transactions will face a final tax of 0.25% to 2%.
People without a National Tax Number (NTN) will be barred from buying vehicles, property, or mutual fund units. Online marketplaces will be required to share seller information with tax authorities.
The FBR has added the definition of “abettor” to target individuals who help in tax fraud. The department now has the power to post officers at business sites, freeze accounts, and seal non-compliant properties.
Sales tax rules have been changed to address invoice fraud and expand the definition of tax fraud. New penalties apply for unauthorized sales invoices.
Excise duty laws now allow immediate seizure of counterfeit items. Transactions with UN agencies and diplomatic missions will be exempt from service tax.
The budget also changes tax procedures. It reduces the audit exemption period from four to three years for taxpayers who have already been audited.
Timelines for tax assessments and appeals have been extended. Filing procedures have been simplified.
These changes are aimed at increasing tax compliance and improving administration.
