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ISLAMABAD: The National Assembly on Tuesday received the report of the Standing Committee on Finance Bill 2026 for the new fiscal year 2026-27, while opposition lawmakers began submitting amendments to the proposed budget legislation.
The Finance Bill introduces a wide-ranging set of tax reforms set to take effect from July 1, including changes to income tax slabs, property transactions, corporate taxation, and import duties.
Lawmakers were told that new tax measures under the Finance Bill will be implemented from July 1, including provisions allowing installment-based payment of Pakistan Telecommunication Authority (PTA) tax on imported new and used mobile phones. The bill also introduces revised tax conditions for salaried individuals and real estate transactions, along with major amendments to the Income Tax Ordinance.
Income Tax Reforms
Under the proposed structure, individuals earning up to Rs600,000 annually will remain exempt from income tax. Those earning between Rs600,000 and Rs1.2 million will be taxed at 1 per cent. Those earning between Rs1.2 million and Rs2.2 million will be taxed Rs6,000 plus 11 per cent on income exceeding Rs1.2 million.
For those earning between Rs2.2 million and Rs3.2 million, a fixed Rs116,000 plus 20 per cent on income above Rs2.2 million will apply. Those earning between Rs3.2 million and Rs4.1 million will pay Rs346,000 plus 25 per cent on income above Rs3.2 million. Income between Rs4.1 million and Rs5.6 million will be taxed at Rs541,000 plus 29 per cent on income above Rs4.1 million.
For earnings between Rs5.6 million and Rs7 million, a fixed tax of Rs976,000 plus 32 per cent on income above Rs5.6 million will apply. Individuals earning above Rs7 million annually will pay Rs1.424 million plus 35 per cent on income exceeding that threshold.
The bill also proposes a 10 per cent tax on banking companies’ income exceeding Rs150 million, and the same rate on fertiliser sector earnings above that threshold from July 1. Other corporate entities with revenue above Rs500 million will be taxed at 8 per cent.
Property and Digital Income Taxation
Under the Finance Bill, 2.75 per cent advance tax will be imposed on sellers of immovable property, while buyers will pay 1.25 per cent based on fair market value. A 5 per cent withholding tax will apply to income earned through social media platforms under Section 151B.
Several welfare and charitable institutions, including the Pakistan Red Crescent Society, Shaheen Foundation, Pakistan Air Force Welfare entities, Pakistan Navy Benevolent Association, SIUT, provincial social security institutions, Make-A-Wish Foundation, and the Quaid-e-Azam Mazar Management Board, have been granted tax exemptions or special status.
Automotive and Import Duties
The Finance Bill revises import duties on vehicles effective July 1. Duty on imported vehicles between 2,000cc and 3,000cc is set at 86 per cent, while vehicles above 3,001cc will face a 92 per cent duty. For smaller vehicles, duties have been reduced.
Vehicles between 1,800cc will see taxes cut from 156 per cent to 74 per cent. Vehicles above 1,500cc will see duties reduced from 91 per cent to 57 per cent. Imports in the 1,000cc to 1,500cc category will face 52 per cent duties, down from 76 per cent, while vehicles up to 850cc will be taxed at 42 per cent, reduced from 66 per cent.
No special excise duty will be applied on vehicles up to 1,800cc under the new auto policy. Electric vehicle imports above a certain category will face Customs duties between 30 per cent and 40 per cent. EVs valued up to $75,000 will be taxed at 30 per cent, while those above $110,000 will face a 40 per cent duty.
PIA aircraft imports will remain exempt from sales tax for 15 years. A 10 per cent concessional sales tax will be imposed on stationery items such as pencils, pens, and sharpeners.
Token Tax and Vehicle Levies
A one-time fixed tax of Rs10,000 will be imposed on vehicles up to 1,000cc from July 1. Vehicles manufactured before 2010 with up to 1,000cc engine capacity will face a 20,000-rupee token tax. For 1,001cc to 1,300cc vehicles, a token tax of 0.3 per cent of invoice value will apply.
A general token tax of 0.25 per cent of invoice value is also proposed under revised rules. Vehicles manufactured before 2010 will be taxed at Rs2,500, while post-2010 vehicles will be charged Rs6,200.
Tax Administration and Enforcement
Amendments to Section 182 of the Income Tax Ordinance 2001 were approved, including provisions allowing the higher of assessed tax or tax liability from the past three years. The government plans to tighten rules for both filers and non-filers.
Failure to comply with Federal Board of Revenue (FBR) notices will attract penalties of up to Rs1 million for first violations and up to Rs2 million for repeated offences. Non-installation of electronic tax monitoring systems will trigger enforcement action, while tampering with FBR monitoring systems may result in up to five years of imprisonment.
A Rs10 million fine will be imposed for the first malfunction of electronic systems, with repeated violations incurring additional penalties. Businesses failing to install mandatory monitoring systems will face legal action, while compliant entities may receive rebates of up to Rs30 million.
From July 1, all income tax returns will be required to be filed electronically through the IRIS system, while corporate financial statements must be submitted in machine-readable formats. An algorithmic settlement mechanism has also been introduced, under which revised returns can be filed without prior approval from a commissioner and without additional penalties or surcharges for eligible taxpayers.
