Finance Minister Muhammad Aurangzeb today presented the Federal Budget for the fiscal year 2025-26 in the Parliament House. The total federal budget outlay has been set at Rs. 17.6 trillion, reflecting a 2 percent year-on-year increase. The budget outlines key expenditure allocations, ambitious revenue targets, and a series of new tax measures designed to broaden the tax base and enhance collection efficiency.
Key Fiscal Figures and Revenue Targets
The budget’s core financial figures for FY26 include:
- Total Budget Outlay: Rs. 17.6 trillion (+2% YoY)
- Current Expenditure: Rs. 16.3 trillion
- Defense Expenditure: Rs. 2.5 trillion
- FBR Tax Target: Rs. 14.1 trillion (a significant 19% YoY increase)
- Non-Tax Revenue: Rs. 5.1 trillion
These targets underscore the government’s commitment to fiscal consolidation and increased self-reliance for its financial needs.
Significant Tax Measures Announced
The budget introduces a comprehensive set of tax measures across various sectors:
- Online Shopping & E-commerce: Online retailers will now be required to collect an 18% sales tax from sellers. A “massive tax” has also been imposed on general online shopping and cash-on-delivery transactions, signaling a robust move to bring the digital economy into the formal tax net.
- Solar Panels: A new 18 percent sales tax has been imposed on solar panel imports, a measure expected to generate significant revenue but potentially impacting the cost of renewable energy adoption.
- Property and Real Estate: The Federal Excise Duty (FED) on the allotment or transfer of commercial and residential plots has been proposed to be abolished, previously ranging from 3 percent to 7 percent. Conversely, advance tax on the purchase of immovable property by filers has been reduced.
- Withholding Tax Adjustments: The tax on dividends has remained unchanged at 15 percent. However, the advance tax on cash withdrawals has been increased for non-filers, further widening the tax differential between compliant and non-compliant individuals.
- Enhanced Enforcement: The government has announced stringent measures against tax evasion, stating that items found without barcodes or tax stamps will be seized immediately, reinforcing the use of the Track & Trace System.
- Penalties for Misuse of Identification: A substantial penalty of Rs. 500,000 fine and a 3-year prison sentence have been introduced for individuals found using wrong CNIC numbers (Computerized National Identity Card) and NTNs (National Tax Numbers) in tax-related matters, signaling a crackdown on identity misuse.
Relief and Other Policy Changes
Beyond revenue generation, the budget also includes some measures impacting public welfare and employment:
- Housing: A new tax credit scheme has been introduced for houses up to 10 marlas, aiming to provide relief and incentivize housing development.
- Pensions and Deceased Employees: The government has withdrawn tax exemptions on higher pensions, and an expiry date has been set on the duration of benefits for spouses of deceased employees, indicating a review of existing benefits structures.
The budget aims to balance the need for increased revenue collection with targeted relief and improved tax governance, setting the fiscal direction for Pakistan for the next year.
