ISLAMABAD: The federal government has unveiled a series of significant tax reforms in the Budget 2026-27, offering relief to salaried individuals, the real estate sector, exporters, and businesses while introducing measures aimed at improving documentation and digital compliance.
According to the salient features of the proposed amendments to the Income Tax Ordinance, 2001, the government has reduced income tax rates for salaried taxpayers by restructuring tax slabs. New intermediate slabs have been introduced, while the income threshold for the maximum 35 percent tax rate has been raised from Rs. 4.1 million to Rs. 7 million annually.
In a major relief measure for property owners, the government has abolished Section 7E, which imposed tax on deemed income from immovable properties. The move is expected to provide significant relief to the real estate sector and property investors.
The government has also rationalized the Super Tax regime by abolishing the levy for taxpayers earning up to Rs. 500 million annually. For those earning above Rs. 500 million, the Super Tax rate has been reduced from 10 percent to 8 percent. However, the concession will not be available to the banking, exploration and production (E&P), and fertilizer sectors.
To boost activity in the property market, advance tax rates on the sale and purchase of immovable properties under Sections 236C and 236K have been significantly reduced and converted into lower flat rates of 2.75 percent and 1.5 percent, respectively.
Exporters have also received relief, with the government reducing tax collection on export proceeds from 2 percent to 1.25 percent. Additionally, the concessionary tax rate of 0.25 percent for IT and IT-enabled services exporters has been extended until Tax Year 2029, signaling continued support for Pakistan’s growing technology sector.
The budget further reduces advance tax on foreign payments made through debit, credit, and prepaid cards from 5 percent to just 0.5 percent, providing relief to overseas spenders and digital consumers.
To support the rapidly expanding e-commerce sector, tax deducted on e-commerce transactions will now be adjustable for sellers with annual turnover exceeding Rs. 200 million.
The government has also introduced a new tax credit equal to 10 percent of investments made in electronic systems integrated with the Federal Board of Revenue (FBR), encouraging businesses to adopt digital compliance and documentation measures.
Among other measures, advance tax on payments for foreign television plays and advertisements has been withdrawn, while several charitable and welfare organizations, including Pakistan Red Crescent Society, Shaheen Foundation, Bahria Foundation, SIUT, and Dawat-e-Hadiya, have been granted permanent income tax exemptions.
To facilitate capital market development, income earned by qualifying Special Purpose Vehicles (SPVs) established for asset-backed securitization has also been exempted from income tax.
Resident Pakistanis owning foreign movable and immovable assets will benefit from the proposed abolition of Capital Value Tax (CVT) on such assets.
The turnover threshold for withholding tax exemption available to small traders has been doubled from Rs. 100 million to Rs. 200 million, while eligible funds and non-profit organizations will now receive exemption certificates for the entire financial year automatically, subject to prescribed conditions.
The government has also clarified the legal framework for determining the cost basis of inherited immovable property and the tax treatment of family settlements following the death of a property owner.
The proposed tax measures are aimed at providing relief to taxpayers, promoting exports and investment, encouraging digitalization, and supporting economic growth while broadening tax compliance across various sectors of the economy.
