Finance Minister Introduces New Tax Measures

During a session at the National Assembly on Monday, Finance Minister Muhammad Aurangzeb presented a series of fresh taxation policies, which included imposing levies on earnings derived from mutual funds and government bonds.

The minister addressed the assembly and outlined three additional budgetary proposals.

Key Proposals Highlighted
  • Increase the tax rate on income from the debt component of mutual funds for companies from 25% to 29%.
  • Introduce a 20% tax on corporate profits from investments in government securities.

Aurangzeb also mentioned a proposition to tax the poultry industry, explaining that a Federal Excise Duty (FED) of Rs10 would be applied per day-old chick at hatcheries, allowing the sector to contribute to the national revenue.

According to the finance minister, the government has presented a well-considered budget for the fiscal year 2025-26, balancing controlled government spending with an emphasis on expanding the tax base and improving compliance.

Aurangzeb also commented on the importance of tariff rationalization, noting that reduced import duties could lower business unit costs and boost exports. He announced the upcoming release of an industrial policy and ongoing consultations on an EV policy.

The government, in partnership with the British Asian Trust, is also preparing to launch Pakistan’s first Skill Impact Bond (SIB), which links funding to the attainment of specific outcomes.

Affordable Housing Initiatives

As part of efforts to boost affordable housing, the government plans to introduce a 20-year loan program aimed at low-income individuals. Aurangzeb clarified that only already-approved dams will be pursued.

On Saturday, while addressing the Senate, Aurangzeb revealed significant relief measures in the federal budget for FY2025-26, including income tax cuts for salaried individuals and reduced General Sales Tax (GST) on imported solar panels. Individuals earning between Rs600,000 and Rs1.2 million annually will now be taxed at 1%, a decrease from the originally proposed 2.5%.

A tax has been implemented on individuals receiving annual pensions exceeding Rs10 million. However, pensioners over 75 years of age are exempt from all taxes, as per the Prime Minister’s directive. The GST on solar panel imports has also been reduced from 18% to 10%.

Changes to FBR Powers

Aurangzeb stated that, following the Prime Minister’s instructions, the FBR’s existing powers regarding tax fraud have been reviewed. Tax fraud is now classified into cognizable and non-cognizable offenses.

For cases involving up to Rs50 million, the FBR will require a court warrant for arrests. An arrest can only be made if the accused has ignored three inquiry notices, attempts to flee, or tampers with records.

Arrest approvals will now require consent from a high-level three-member FBR committee, rather than an individual officer, and arrested individuals must be presented before a special judge within 24 hours. Measures will be in place to ensure no citizen is mistreated during this process.

Real Estate Regulations

In the real estate sector, the Finance Bill aims to prevent individuals from purchasing properties beyond their declared financial means under Section 114C of the Income Tax Ordinance.

However, on the Prime Minister’s instructions, this law will not apply to residential plots or houses worth up to Rs50 million, commercial properties worth up to Rs100 million, and vehicles valued up to Rs7 million.

Aurangzeb acknowledged concerns about the potential economic impact of the Iran-Israel tensions but assured the assembly that the government is prepared to manage any resulting situation.