The Federal Board of Revenue (FBR) has issued updated versions of the Income Tax Ordinance, 2001 amended upto July 31, 2025 and the Sales Tax Act, 1990 amended upto June 30, 2025, incorporating all legislative changes from the Finance Act, 2025. These documents, amended up to July 31, 2025, and June 30, 2025, respectively, serve as a comprehensive reference for taxpayers and practitioners. The amendments introduce significant changes across various tax laws, including revised income tax slabs for salaried individuals, new tax regimes for e-commerce, and administrative reforms.
Income Tax Ordinance, 2001: Key Changes
The updated Income Tax Ordinance includes several key amendments stemming from the Finance Act, 2025. These changes are aimed at providing relief to lower-income salaried individuals while also broadening the tax base and enhancing enforcement.
- Revised Tax Rates for Salaried Individuals: The new law introduces revised tax slabs, with a focus on reducing the burden on low- and middle-income earners. The tax rate for the income bracket of Rs. 600,001 to Rs. 1,200,000 has been significantly reduced from 5% to just 1%. Similarly, other slabs up to an annual income of Rs. 3.2 million have also seen reductions.
- Taxation of E-commerce and Digital Transactions: A major addition is the introduction of a new tax regime for e-commerce. A charging section, 6A, has been added to tax payments received for digitally ordered goods or services. Withholding tax will now be collected by online marketplaces and payment intermediaries.
- Pension Income Becomes Taxable: The updated law makes pension income from a former employer taxable, a significant change from previous exemptions.
- Restoration of Tax Rebate: A 25% tax rebate for full-time teachers and researchers has been reintroduced, effective retroactively from July 1, 2025.
- Reduced Surcharge: The surcharge rate for salaried individuals with a taxable income over Rs. 10 million has been reduced from 10% to 9%.
Sales Tax Act, 1990: New Provisions
The amendments to the Sales Tax Act, 1990, primarily focus on administrative measures and expanding the tax net, particularly for digital commerce.
- E-commerce and Digital Platforms: New definitions for “e-commerce” and “online market place” have been inserted to bring digital transactions into the sales tax framework.
- Cargo Tracking System: The concept of a “Cargo Tracking System” has been introduced to monitor goods throughout the supply chain and combat tax evasion. An “e-bilty,” a digital document, is now required to accompany goods in transit.
- New Enforcement Measures: To encourage sales tax registration and compliance, new sections have been added empowering the FBR to take enforcement actions, such as placing a bar on the operation of bank accounts and the transfer of immovable property for non-compliant individuals.
Reference Point for Compliance
The issuance of these updated ordinances is a crucial step for the FBR to ensure clarity and provide a single reference point for taxpayers, tax consultants, and businesses navigating the changes introduced by the latest Finance Act. The comprehensive documents are available on the FBR’s official website, detailing every amendment and its implications for tax compliance in the new fiscal year.
