Budget 2025-26 to tighten tax regulations on non-filers

The Pakistan Budget 2025-26 is scheduled to impose severe tax reforms targeting non-filers and tax evaders, sources told ARY News on Monday.

As part of the new improvements, the Federal Board of Revenue (FBR) is suggesting a tenfold increase in fines, through Point of Sale (POS) systems, for tax fraud, increasing penalties to PKR 5 million from PKR 500,000.

Hidden businesses that maintain secret transactions other than the POS system will also experience severe legal actions.

In the Pakistan Budget 2025-26, non-filers’ tax reforms will have strict financial barriers. Limitations would include a ban on buying vehicles and real estate, restrictions on stock market investments and mutual funds, and they will not be able to conduct large-scale financial transactions.

However, at odds with previous discussions, mobile phone SIMs and internet devices will not be blocked, according to FBR sources.

Additionally, non-filers will not be able to travel abroad, except for religious pilgrimages. The withholding tax on cash withdrawals that exceed PKR 50,000 will be increased from 0.6% to 1.2%, aimed at discouraging non-compliant financial practices.

The Pakistan Budget 2025-26 also suggests wider tax reforms to enhance the tax net and improve tax collection.

Under the influence of the International Monetary Fund (IMF), the government is considering imposing an agricultural income tax for the first time. Digital earnings through freelancing or other online platforms will also be taxed, especially foreign earnings.

Likewise, CGT on shares and property is likely to increase. The government may also implement taxes on fertilisers, insecticides, and confectionary items, while decreasing tax rates on beverages and cigarettes.

Tax exemptions previously decided for the former FATA region may be eradicated, with the implementation of a 12% tax rate.

In spite of severe tax enforcement measures, the budget summaries certain relief measures for salaried individuals, including a 10% salary increase for government employees and a 5% to 7.5% increase in pensions for retired civil servants.

Employees in Grades 1 to 16 are set to receive a 30% special allowance, which will be integrated into their basic pay, replacing ad hoc relief.

In Budget 2025-26, the Government of Pakistan aims to broaden the tax base, reduce tax evasion, and enhance revenue collection, while still providing limited support to salaried individuals.

The final details of these proposals will be confirmed during the official presentation of the Budget 2025-26.