Budget 2025-26: Govt Proposes Higher Taxes on Bank Withdrawals, Savings, and Vehicles

As Pakistan gears up to unveil its Budget 2025–26, government insiders confirm that a range of new tax measures are on the table — including higher taxes on bank deposits, savings schemes, and cash withdrawals by non-filers, all aimed at improving revenue and broadening the tax base.

Key Tax Proposals

• The withholding tax on cash withdrawals by non-filers is expected to double from 0.6% to 1.2%.
• A new tax slab may be introduced for daily cash withdrawals exceeding Rs50,000, to discourage undocumented cash transactions.
• The General Sales Tax (GST) on locally manufactured vehicles under 800cc is likely to be increased from 12.5% to 18%, eliminating a previous tax relief for low-cost car buyers.
• Additional levies on petrol and diesel vehicles, revisions in capital gains taxes, and adjustments to the super tax are also being considered.
• Interestingly, the super tax rate could be reduced to provide relief for large industries, signaling a move to boost investment and industrial growth.

Development Spending Gets a Boost

Despite the proposed tax hikes, the federal government plans to inject a major stimulus through development spending, earmarking over Rs1,000 billion for infrastructure and social sector projects in FY2025-26.

This includes Rs270 billion in foreign borrowing to help finance the development budget.

Provincial development plans are also expanding:

• Punjab: Rs1,190 billion
• Sindh: Rs887 billion
• Khyber Pakhtunkhwa: Rs440 billion
• Balochistan: Rs280 billion

Together, the provinces will borrow Rs802 billion from external sources and increase their development spending by Rs609 billion compared to the current fiscal year.

Economic Goals for FY2025-26

The government is expected to set ambitious macroeconomic targets:

• GDP Growth: 4.2% (vs. 2.68% in FY2024-25, which missed the 3.6% target)
• Inflation: 7.5% (significantly lower than current double-digit inflation)

These targets signal an optimistic outlook and a push toward fiscal consolidation, inflation control, and economic revival.

Final Budget Details Coming Soon

While these proposals are not yet finalized, they reflect the government’s effort to balance public investment with fiscal discipline and meet IMF requirements for broadening the tax base. The federal budget is expected to be presented later this month.