The National Assembly received the report of the Standing Committee on the Finance Bill 2026 for the fiscal year 2026-27 on Tuesday, while opposition members started proposing amendments to the budget legislation. The bill outlines extensive tax reforms that will take effect from July 1, covering income tax brackets, property transaction levies, corporate taxes, and import duties.
Notably, the bill introduces provisions allowing importers to pay the Pakistan Telecommunication Authority (PTA) tax on new and used mobile phones in installments. This measure aims to ease the financial burden on importers and consumers alike.
In addition to mobile phone tax reforms, the bill revises tax regulations for salaried individuals and real estate dealings, alongside significant amendments to the Income Tax Ordinance. Under the new income tax structure, individuals earning up to Rs600,000 annually remain exempt from tax. Earnings between Rs600,000 and Rs1.2 million will be subject to a 1% tax rate.
For incomes ranging from Rs1.2 million to Rs2.2 million, the tax will be Rs6,000 plus 11% on income exceeding Rs1.2 million. Those earning between Rs2.2 million and Rs3.2 million will pay Rs116,000 plus 20% on income above Rs2.2 million. Taxpayers with earnings from Rs3.2 million to Rs4.1 million will be charged Rs346,000 plus 25% on income exceeding Rs3.2 million.
Individuals with incomes between Rs4.1 million and Rs5.6 million will face Rs541,000 plus 29% on income above Rs4.1 million, while those earning between Rs5.6 million and Rs7 million will pay Rs976,000 plus 32% on income exceeding Rs5.6 million. For annual incomes exceeding Rs7 million, the tax will be Rs1.424 million plus 35% on the surplus.
The bill also imposes a 10% tax on banking companies’ income above Rs150 million, and the same rate applies to the fertiliser sector’s earnings beyond this threshold starting July 1. Other corporate entities with revenues exceeding Rs500 million will be taxed at 8%.
Regarding property and digital income, the Finance Bill enforces a 2.75% advance tax on sellers of immovable property, while buyers will pay 1.25% based on the fair market value. A 5% withholding tax will be levied on income generated via social media platforms under Section 151B.
Several welfare and charitable organizations, including the Pakistan Red Crescent Society, Shaheen Foundation, Pakistan Air Force Welfare entities, Pakistan Navy Benevolent Association, SIUT, provincial social security bodies, Make-A-Wish Foundation, and the Quaid-e-Azam Mazar Management Board, have been granted tax exemptions or special status.
The bill also revises import duties on vehicles effective from July 1. Import duty on vehicles with engine capacities between 2,000cc and 3,000cc is set at 86%, while vehicles above 3,001cc will face a 92% duty. Meanwhile, duties on smaller vehicles have been reduced significantly. Vehicles up to 1,800cc will see taxes cut from 156% to 74%, and vehicles over 1,500cc will have duties lowered from 91% to 57%.
For vehicles in the 1,000cc to 1,500cc range, duties will be 52%, down from 76%, while those up to 850cc will be taxed at 42%, reduced from 66%. Under the new auto policy, no special excise duty will be applied on vehicles up to 1,800cc. Electric vehicles (EVs) above certain categories will face customs duties between 30% and 40%, with EVs valued up to $75,000 taxed at 30%, and those above $110,000 subject to 40% duty.
Imports of Pakistan International Airlines (PIA) aircraft will continue to be exempt from sales tax for 15 years. Additionally, a 10% concessional sales tax will be applied to stationery items such as pencils, pens, and sharpeners.
Regarding vehicle levies, a one-time fixed token tax of Rs10,000 will be charged on vehicles up to 1,000cc starting July 1. Vehicles manufactured before 2010 with engine capacities up to 1,000cc will face a Rs20,000 token tax. For vehicles between 1,001cc and 1,300cc, a token tax of 0.3% of the invoice value will apply, while a general token tax of 0.25% of invoice value is proposed under revised rules.
Vehicles manufactured before 2010 will be taxed at Rs2,500, and post-2010 models will be charged Rs6,200. Amendments to Section 182 of the Income Tax Ordinance 2001 were also approved, allowing the government to recover the higher of assessed tax or tax liability from the past three years.
In a significant development, the government plans to enforce stricter compliance for both tax filers and non-filers. Failure to respond to Federal Board of Revenue (FBR) notices may result in penalties up to Rs1 million for initial violations and up to Rs2 million for repeated offences. Non-installation of electronic tax monitoring systems will invite enforcement actions, and tampering with these systems could lead to imprisonment for up to five years.
A fine of Rs10 million will be imposed for the first malfunction of electronic monitoring systems, with further penalties for subsequent violations. Businesses not installing mandatory monitoring systems will face legal consequences, whereas compliant entities may qualify for rebates up to Rs30 million.
From July 1, all income tax returns must be filed electronically via the IRIS system, and corporate financial statements are required to be submitted in machine-readable formats. The bill also introduces an algorithmic settlement mechanism, enabling eligible taxpayers to file revised returns without prior commissioner approval and without additional penalties or surcharges.
