Pakistan proposes over PKR 500 billion in new taxes to meet FY26 revenue target

Pakistan on Tuesday proposed over PKR 500 billion in new taxes as well as enforcement measures against non-filers besides withdrawal of exemptions to meet PKR 14.131 trillion revenue target for the upcoming fiscal year.

The Finance Bill (2025-26) revealed that Pakistan's tax collection body — the Federal Board of Revenue — proposed a new amendment to deduct advance tax on pension payments above a certain limit. The proposed amendment aims to bring high-value pensions into the tax net to promote greater equity in the tax system.

By targeting pension amounts exceeding PKR 10 million and applying the 5% tax rate to individuals under 70, the proposed measure ensures that wealthy retirees contribute a fairer share without burdening older or lower-income pensioners.

Sources said that the FBR has estimated it would collect PKR 2 billion from withdrawal of exemption on pensions.

Tax on income from coupon washing

According to the Finance Bill, the FBR has also proposed advance tax under section 151A be deducted on the profits arising from the trading of Pakistan Investment Bonds (PIBs) and T-Bills across the counters before the date of maturity.

PIBs and T-Bills are traded over the counter through banks, unlike Sukuk bonds, which are traded through NCCPL-regulated markets. In the secondary market, investors (individuals or institutions) can sell these securities before maturity to buyers to capture capital gains which are not subjected to withholding tax.

Later, the original seller can buy back the same security. This can lead to a tax loss for the government, as the capital gain from the first sale may not be reported in the income tax return.

Sources said that FBR has estimated it would collect PKR 10 billion on tax on income from coupon washing.

Increase in the tax rate on 'profit on debt'

According to the Finance Bill, FBR has also proposed to increase "profit on debt" tax rate from 15 to 20%. The proposal aims to enhance fairness and reduce tax arbitrage by eliminating the PKR 5 million threshold and applying a uniform 20% advance tax on profit on debt for all persons.

Sources said that FBR has estimated PKR 56 billion can be collected from this measure.

Increase in tax rate on dividend from mutual funds

According to the Finance Bill, FBR has also proposed to charge tax at the rate of 15% & 25%, respectively, under Division-III, Part-I of First Schedule, in case of mutual funds, contingent upon proportional income derived from average annual investments in debt securities and equities.

The increase in dividend tax rates on mutual funds aims to align the tax treatment of investment income with broader revenue goals and ensure a fair contribution.

Sources said that FBR has estimated it would collect PKR 14 billion on increase tax rate of dividend from mutual funds.

According to the Finance bill, the government has also abolished the tax exemption for FATA and PATA which will not only help in additional revenue but also provide a level playing field to the steel and ghee industries in other parts of the country.

The government has also abolished the Federal Excise Duty (FED) on the purchase or transfer of property, effective July 1, 2025. The FED, which was previously set at 3-7%, has now been reduced to zero.