What Are the Proposed Tax Changes in Pakistan FY26 Finance Bill?

The federal government has proposed a wide-ranging set of tax reforms in the Finance Bill 2025–26, introducing changes to income tax slabs for salaried individuals, property transaction taxes, corporate levies, mobile phone registration procedures, and taxation of social media earnings. The measures remain proposals and will only take effect from July 1, 2025, subject to parliamentary approval.

According to the proposed income tax structure, people with income in the range of Rs 600,000 or less will not be taxed. The revenue ranging from Rs600,000 to Rs1.2 million would be taxed at 1 percent, with progressive rates for higher income brackets. According to the draft, the top earners with income of more than Rs7 million would be taxed at 35 percent plus a fixed rate of Rs1.424 million.

Proposed Income Tax Slabs (Salaried Individuals)

• Up to Rs600,000 → Exempt
• Rs600,000 – Rs1.2 million → 1%
• Rs2.2M – Rs3.2M → Rs116,000 + 20% on income above threshold
• Rs3.2M – Rs4.1M → Rs346,000 + 25% on income above threshold
• Rs4.1M – Rs5.6M → Rs541,000 + 29% on income above threshold
• Rs5.6M – Rs7M → Rs976,000 + 32% on income above threshold
• Above Rs7M → Rs1.424 million + 35% on income above threshold

The bill also makes changes in the property sector to advance taxation in real estate transactions. The draft calls for a 2.75 percent advance tax levy on the total value of the property to be sold and a 1.25 percent tax levy on the fair market value of the property to be purchased by the buyer. The measures address the documentation aspect and transparency in property transactions.

The proposals also include changes to corporate taxation. The tax rate would be 10 percent for banking companies and entities in the fertilizer sector with income exceeding Rs150 million, and 8 percent for other large corporations with income exceeding Rs500 million.

The Finance Bill further proposes to permit payment of tax by the Pakistan Telecommunication Authority (PTA) for imported new and used mobile phones in installments to relieve the financial burden on consumers.

The government has introduced an important digital economy measure, which will impose a 5 per cent withholding tax on income generated from social media platforms under Section 151B. The tax would be levied on content creators, influencers and others who generate money from online content.

The draft bill also proposes exemptions for a number of welfare and charitable institutions, such as the Pakistan Red Crescent Society, SIUT, and Make-A-Wish Foundation.

The Finance Bill 2025–26, which is currently before Parliament, may be subject to amendments prior to final approval.