Budget 2025–26: Govt Eyes New Taxes on Vehicles Digital Income, Bakery Goods Relief for Salaried Class

As Pakistan prepares to announce its 2025–26 federal budget, key tax policy changes are expected, aiming to broaden the tax base under IMF guidelines while offering selective relief for salaried workers and key industries.

New Taxes Proposed:

• Vehicles:
  • GST on 850cc cars may increase by 5.5%.
  • All locally assembled vehicles are likely to face 12.5% 18% GST, making them costlier.
• Digital & Freelance Income:
  • Income from social media, freelancing, and overseas digital platforms is expected to be taxed for the first time.
• Bakery Items & Agriculture:
  • Bakery products, fertilizers, and pesticides, previously tax-exempt, could now be taxed.
  • Agricultural income to be brought into the tax net, marking a historic shift.
• FATA Region:
  • Tax exemptions for former FATA areas may be abolished. A 12% tax is proposed.

Tax Relief Measures:

• Duty Cuts:
  • 2–3% reduction in regulatory and customs duties on 3,500+ imported items, especially industrial raw materials.
  • Lower or abolish withholding tax on raw material imports for industry & construction.
• Beverages & Cigarettes:
  • Surprise relief: Reduced taxes suggested on soft drinks and cigarettes.
• Super Tax Adjustments:
  • Rs150 million profit: No change (exempt)
  • Rs200 million: Super tax cut to 0.5%
  • Rs250 million: Cut to 1%
  • Rs300 million+: Remains at 4%
• Property Sector:
  • The federal excise duty on transactions may be abolished, but the capital gains tax on real estate and shares is likely to rise.

Relief for Salaried Class & Govt Employees:

• 10% salary increase for the salaried class.
• 5%–7.5% pension raise for retired government employees.
• 30% allowance hike for Grade 1–16 employees.
• Ad hoc allowances to be merged into basic salary for simplification.

These measures reflect a delicate balancing act — offering relief to the working class and productive sectors while expanding taxation to previously untaxed income streams, in line with the IMF’s reform conditions.