Proposed Tax Changes for Tax Year 2025–2026 – What You Need to Know
The government has rolled out a series of proposed tax changes in the upcoming Finance Bill 2025–2026 that will impact salaried individuals, freelancers, digital businesses, and investors alike. Here’s a simple breakdown of what’s being proposed—and what it might mean for you.
Income Tax Updates for Salaried Individuals
Good news for salaried people! The government is offering tax relief by reducing rates in several income brackets. Here’s how:
- Income between PKR 600,001 and 1,200,000: Tax rate reduced from 5% to 1%
- Income up to PKR 2,200,000: Rate reduced from 15% to 11%
- Income between PKR 2,200,001 and 3,200,000: Now taxed at 23%, down from 25%
Example: If you earn Rs. 1.2 million annually, your tax drops from Rs. 30,000 to Rs. 6,000 only!
Revised Tax Slabs (Salaried Individuals)
| Annual Income | Tax Rate |
| Up to Rs. 600,000 | 0% |
| Rs. 600,001 – 1,200,000 | 1% on the amount over Rs. 600,000 |
| Rs. 1,200,001 – 2,200,000 | Rs. 6,000 + 11% of amount over Rs. 1.2M |
| Rs. 2,200,001 – 3,200,000 | Rs. 116,000 + 23% over Rs. 2.2M |
| Rs. 3,200,001 – 4,100,000 | Rs. 346,000 + 30% over Rs. 3.2M |
| Above Rs. 4,100,000 | Rs. 616,000 + 35% over Rs. 4.1M |
Other Income Tax Changes
- Surcharge Reduction: For those earning over Rs. 10 million, the surcharge drops from 10% to 9%
- Super Tax (High-Income): Minor 0.5% reductions in most slabs, effective from 2026
- Tax on Pension: If you’re earning more than Rs. 10 million from pension, a 5% tax will now apply
- Profit on Debt (Section 7B): Tax rate increased from 15% to 20%
- Advance Tax on Cash Withdrawals (Non-filers): Rate raised from 0.6% to 0.8%
Property & Housing
- Fair Rent Rule: For commercial properties, rent must be at least 4% of market value unless proven otherwise
- Home Loan Tax Credit: Tax credit available on interest paid for housing loans (up to 2,500 sq. ft. for houses and 2,000 sq. ft. for flats), if the loan is taken from a regulated lender
Freelancers & Digital Businesses
- Mandatory Tax Filing:
Anyone earning through digital platforms (freelancers included) must file tax returns if their income exceeds the threshold
Before: Optional if not NTN-registered
Now: Mandatory
“Digital earnings come with digital responsibility.”
- E-Commerce Tax Collection:
Online platforms and logistics providers will now be responsible for collecting 18% sales tax on digital transactions- Payment gateways (e.g., banks) will deduct sales tax on online payments
- Courier services will collect tax on Cash-on-Delivery (CoD) orders
- Withholding tax rate increased from 1% to 2%
Investments & Mutual Funds
- Mutual Fund Tax:
- Debt-based funds: 25% tax
- Equity-based funds: 15% tax
- Section 114C – Transaction Restrictions:
Only those who’ve filed tax returns and can justify their financial resources will be allowed to make high-value purchases (like cars, properties, or investments) - Section 175AA – Data Sharing with Banks:
FBR will be allowed to share tax data of high-risk individuals with banks—including income, declared accounts, and financial history
Sales Tax Proposals
- 18% Sales Tax proposed on imported solar panels to encourage local products
- Hybrid cars will now also be taxed at 18%, like petrol and diesel cars
- FATA & Balochistan : A gradual 10% sales tax will be introduced over the next 5 years
- 850cc Cars: The 12.5% reduced tax rate is being removed; these cars will now face the standard 18%
- Exemptions Extended:
- Income tax and withholding tax exemptions for FATA/PATA extended to Tax Year 2026
- Electricity supply exemption for FATA/PATA extended till 30 June 2026
Bank Account Control
- Section 14AC:
Tax registration is now crucial. The Commissioner can block bank accounts of individuals who fail to register under tax laws.
Customs & Trade Reforms
To speed up trade and reduce smuggling:
- Intelligence-led customs system being implemented
- Pre-arrival clearance at ports will be encouraged
- Legal reforms to reduce container delays caused by litigation
- Carbon Levy introduced on furnace oil and diesel:
- Rs. 2.5/litre in FY 2025–26
- Rs. 5/litre in FY 2026–27
Sample Tax Comparison (Salaried Individuals)
| Monthly Salary | Annual Income | 2025 Tax | Proposed 2026 Tax | Savings |
| Rs. 100,000 | Rs. 1,200,000 | Rs. 30,000 | Rs. 6,000 | Rs. 24,000 |
| Rs. 400,000 | Rs. 4,800,000 | Rs. 945,000 | Rs. 861,000 | Rs. 84,000 |
| Rs. 1,000,000 | Rs. 12,000,000 | Rs. 3,465,000 + surcharge | Rs. 3,381,000 + surcharge | Rs. 126,210 |
Need Help Understanding These Changes?
Corptax Solutions is here to simplify tax for individuals, freelancers, and businesses. Whether you’re registering, filing, or just confused, we’ve got you covered.
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