The National Assembly passed the federal budget for the fiscal year 2025-26 on Thursday, totaling Rs. 17.6 trillion, which includes Rs. 463 billion in new taxes aimed at boosting revenue.
The budget introduces a range of taxes targeting digital platforms, foreign vendors, streaming services, e-commerce, and cash-on-delivery transactions. A new climate levy of Rs. 2.5 per litre has been imposed on petrol and diesel, while a tax of 1 to 3 percent on fuel-based vehicles is intended to subsidize electric vehicle adoption. Additionally, pensions exceeding Rs. 10 million annually will be subject to a 5 percent tax, and a 10 percent sales tax has been approved for imported solar panels.
In a notable change, the government has relaxed its enforcement measures against non-filers. Restrictions on economic transactions will now apply only if residential property is valued over Rs. 50 million, commercial property exceeds Rs. 100 million, or car purchases surpass Rs. 7 million. Non-filers will still face limitations on maintaining savings accounts and withdrawing more than Rs. 100 million in cash annually, with stock market investment restrictions applying only above Rs. 50 million.
The budget allocates a significant Rs. 8.2 trillion for interest payments, with defense spending set at Rs. 2.55 trillion, excluding pensions. Development and civil government expenses are budgeted at Rs. 917 billion. The National Assembly has also retained the Federal Board of Revenue’s (FBR) powers to arrest individuals involved in sales tax fraud, albeit with new safeguards.
Prime Minister Shehbaz Sharif’s coalition partners supported the budget, citing the government’s acceptance of their demands, including the exemption of salaried individuals earning Rs. 100,000 per month from certain taxes.
Changes to the tax structure include an increase in the income tax rate on the debt portion of mutual funds issued to companies from 25 to 29 percent, and a rise in the tax on income from government loans from 15 to 20 percent. A withholding tax exemption was also approved for individuals selling residential property after holding it for at least 15 years.
The Finance Act 2025 is set to take effect on July 1.
