The Pakistan Budget 2025-26 has been presented in the National Assembly, featuring some pleasant announcements alongside some less palatable measures. This budget provided much-needed relief to the salaried class. However, non-filers are not going to like it as their transactions have been restricted even more. Not only this, but cars, solar panels, property, online shopping, and many other things have been affected by this budget, which I will discuss in this blog.
Let’s start with the income tax reduction and increase in salaries.
Income Tax And Salaries
One of the most talked-about aspects of the budget is the change in income tax brackets for salaried individuals. It has been reduced for most of the slabs, but the minimum exempted income tax slab is kept to 600,000, which was thought to be increased. Let’s see the new and old income taxes for each slab:
| Annual Income | Tax Rate Old (2024-25) | Tax Rate New (2025-26) |
| 0 to 6 Lacs | 0% | 0% |
| Up to 12 Lacs | 5% of the amount exceeding Rs. 600,000 | 1% of the amount exceeding Rs. 600,000 |
| 12 Lacs to 22 Lacs | Rs. 30,000 + 15% of the amount exceeding Rs. 1,200,000 | Rs. 6,000 + 11% of the amount exceeding Rs. 1,200,000 |
| 22 Lacs to 32 Lacs | Rs. 180,000 + 25% of the amount exceeding Rs. 2,200,000 | Rs. 116,000 + 23% of the amount exceeding Rs. 2,200,000 |
| 32 Lacs to 41 Lacs | Rs. 430,000 + 30% of the amount exceeding Rs. 3,200,000 | Rs. 346,000 + 30% of the amount exceeding Rs. 3,200,000 |
| More Than 41 Lacs | Rs. 700,000 + 35% of the amount exceeding Rs. 4,100,000 | Rs. 616,000 + 35% of the amount exceeding Rs. 4,100,000 |
This reduction of around 2.5% is intended to put a little more take-home pay in employees’ pockets amid rising living costs.
Moving to the salary increase, it’s 10% for the government employees.
Coming to the retired government employees, their pension has been increased by 7%. Furthermore, the finance minister announced important pension reforms to ensure the system’s sustainability. Notably, the duration of a family pension (the pension passed on to a spouse a pensioner’s death) is now capped at 10 years.
Property
The real estate sector sees a mix of incentives and continued reforms. Starting with the housing scheme focused towards low-income people. The details are yet to be revealed, but the idea seems to be subsidised loans or low-cost housing units.
There is a proposal to abolish the FED on commercial property, which was 7% last year on the sale or purchase of property. Not only this, but withholding tax on the purchase of property has also been reduced as follows:
- from 4% to 2.5%
- from 3.5% to 2%
- from 3% to 1.5%
Also, the government has reduced the stamp duty fee from 4% to 1% in Islamabad. All these efforts show that the government is aiming to revive the real estate and construction industry in Pakistan.
Vehicles
If you were about to buy a car, there are some important points for you in this budget. Certain cars will face higher taxes, especially the small cars. The smaller engine cars (less than 850cc) enjoyed 12.5% sales tax, which has been increased to the standard 18% GST. So, Alto’s price is going to increase soon? If you ask me, these entry-level cars are mostly bought by people with low to medium incomes. This policy (“streamline” the tax system by taxing all cars uniformly) will make it harder for them to purchase even an entry-level new car.
If I talk about the brighter side, the duty on the car’s engine has been reduced to 5%. Furthermore, other raw materials and CKD parts also face a lower duty (from 20% previously to 15% now).
Wait, there’s more in the vehicles! The government has also worked on the New Energy Vehicle Policy to promote electric vehicles, especially 2 and 3-wheelers in Pakistan, aiming to shift a substantial portion of these vehicles towards electric power.
Impact on Non-Filers
This budget really turns up the heat for the non-filers.
So,if you are a non-filer, life is about to get a little inconvenient. Here are the restrictions on the non-filers:
Non-filers
- will not be able to trade shares
- will not be able to buy property
- will not be able to buy a car
- will not be able to invest in mutual funds
Moreover, the cash withdrawal tax is to be increased from 0.6% to 1% for the non-filers for single-day transactions exceeding Rs. 50,000.
Will Online Shopping be Expensive?
Love online shopping? Things may get pricier soon as the government has brought a new policy: an 18% sales tax on many online purchases, to be collected by courier or payment providers. Under the new framework, if you buy something online, payment intermediaries like banks and mobile wallets will now collect sales tax on digital payments, and courier companies will collect it on Cash-on-Delivery (COD) orders. Not only this, but a 5% tax on the imported e-commerce items is also proposed.
The proposed rates of advance tax deduction are as under:
Rates of Deduction for Payments Through Digital Means
| Sr | Description | Tax Rates |
| 1. | Where the amount paid does not exceed rupees ten thousand | 1% of the gross amount paid |
| 2. | Where the amount paid exceeds rupees ten thousand but does not exceed rupees twenty thousand | 2% of the gross amount paid |
| 3. | Where the amount paid exceeds rupees twenty thousand | 0.25% of the gross amount paid |
Rates of Deduction for Cash on Delivery
| Sr | Description | Tax Rates |
| 1. | On supply of electronic goods | 0.25% of the gross amount paid |
| 2. | On supply of clothing articles, apparels, garments etc. | 2% of the gross amount paid |
| 3. | On supply of goods other than mentioned in S. No. 1 and 2 above | 1% of the gross amount paid |
Solar Panel Prices Will Increase?
When the trend of solar energy started to rise in Pakistan, the government approved an 18% general sales tax on solar panel imports. It is to encourage local manufacturing. However, the best solar panels in Pakistan are mostly imported. So, it will increase the cost of getting solar panels. It doesn’t seem to be a great decision as it might reduce the number of households converting to green energy.
Custom Duties
In line with its broader economic reforms, the government has introduced changes to customs duties and tariffs on imports. Regulatory duties are to end by 2030, and Customs Act 1969 Schedule 5 will be abolished in 5 years.
Custom duty maximum slab is 15% now, which will benefit the:
- Pharma
- Textile
- Engineering
- IT& telecom
Other Impacts
Here are some other impacts of the Pakistan Federal Budget 2025-26:
- The budget shows support to small and medium enterprises, with 100 Arab rupees in small business financing to be allocated.
- Up to 1 lakh guarantee free debt to agriculturists is also proposed.
- Items with no barcodes or tax stamps will now be seized.
- Super Tax on 20 crore to 50 crore annual income reduced by 0.5%
- 2.5% Carbon Levy on petrol and diesel
- Steel raw material import duty reduced from 15% to 10%
- Textile raw material import duty abolished
Final Verdict
The Budget 2025–26 of Pakistan is a mix of reliefs and new duties, carefully crafted under the watch of the IMF and amidst domestic economic challenges. Salaried individuals are going to cheer as the income tax has been reduced. The property market and construction industry will also see improvement after the approval of the budget. However, things don’t look too promising for the non-filers and the people interested in buying small cars.
