On August 9, 2025, the Federal Board of Revenue (FBR) implemented amendments to the income tax regulations for the fiscal year 2025-26. These changes aim to broaden the tax base and reduce non-compliance. The key focus is on undocumented cash transactions and real estate dealings, promoting timely tax return filings and improving revenue collection.
Non-filers who withdraw over PKR 50,000 daily from their bank accounts are now subject to a withholding tax of 0.8%, an increase from the previous rate of 0.6%. Although the Senate Finance Committee proposed raising the withdrawal threshold to PKR 75,000, the Federal Board of Revenue (FBR) has chosen to maintain the limit at PKR 50,000. Banks are authorized to deduct this adjustable advance tax from non-filers, encouraging individuals to fulfill their tax obligations.
FBR Revised Real Estate Tax Rules
The FBR also updated real estate transaction taxes under Sections 236C and 236K of the Income Tax Ordinance:
- Buyers: Benefit from a 1.5% reduction in withholding tax.
- Sellers/Transferors: Face a 1.5% tax increase across all slabs, adjusting capital gains on property sales.
- Exemptions: Owners holding property for over 15 years, declared in tax returns, or residing in it, are exempt from withholding tax under Section 236C.
The purpose of these changes is to simplify property transactions and guarantee fair taxation. The Federal Board of Revenue (FBR) has clarified that taxpayers who have been audited in the past three years will not be subject to re-audit during this time. This provides relief and fosters trust in the tax system. The measure aims to discourage unnecessary audits and concentrate efforts on entities that are not compliant.
The recent amendments align with Pakistan’s efforts to formalise its economy, highlighted by Khyber Pakhtunkhwa’s initiative to tax wedding halls. On August 7, the Khyber Pakhtunkhwa Revenue Authority (KPRA) met with the Wedding Hall Association of Haripur, encouraging them to make timely tax payments to strengthen provincial revenue. These initiatives are part of a broader national effort to improve tax compliance.
The FBR’s tax reforms enhance Pakistan’s fiscal framework by targeting non-filers and undocumented transactions. While these reforms have the potential to increase revenue, they may adversely affect cash-heavy sectors.
