The new taxation measures, aimed at raising Rs339.5 billion in revenue, came into effect today [July 1, 2025], after President Asif Ali Zardari formally assented to the Finance Bill for the fiscal year 2025-26, completing the constitutional procedure for the passage of the federal budget.
These measures include an increase in the withholding tax rate on profit on debt, tax on domestic e-commerce, a ban on economic transactions of ineligible persons, tax relief for the salaried class, and a heavy reliance on indirect taxation that affects the general public.
The new measures also include reductions in customs duties, regulatory duties, and additional customs duties on imports of inputs, raw materials, semi-finished products, and finished goods across various sectors, except for the automobile industry.
Key tax changes include an increase in the withholding tax on cash withdrawals from banks by non-filers, which rises from 0.6% to 0.8%. A new restriction has also been placed on financial transactions for non-filers, as per the thresholds outlined in the Finance Act 2025.
In a move to strengthen tax fraud deterrence, the Finance Act 2025 stipulates that no arrests can be made for tax fraud before an inquiry is completed. However, a three-member committee from FBR is empowered to authorize arrest warrants in cases where the tax loss exceeds Rs50 million, provided there is evidence that the accused is not cooperating with the investigation or is attempting to evade justice.
A “New Energy Vehicles Adoption Levy” has been introduced on locally manufactured and imported vehicles. Additionally, a “Digital Presence Proceeds Tax” has been imposed, requiring foreign vendors with significant digital presence in Pakistan to pay taxes on the proceeds of any supply of digitally ordered goods or services from outside the country, whether delivered digitally or physically.
The Finance Act 2025 also includes a withdrawal of the 3% Federal Excise Duty on the allotment or transfer of residential and commercial properties. Furthermore, withholding tax on property purchases under Section 236K has been reduced, while the tax rate for property sellers under Section 236C has been increased.
The government has also announced that FBR and banks will exchange banking and tax information for high-risk individuals, targeting cases of tax fraud. Additional taxes include a 10% federal excise duty on day-old chicks in the poultry sector and increased tax rates on dividends from mutual funds. The withholding tax on profit from government securities has been increased from 15% to 20%.
