The government has proposed to slash the ‘Super Tax’ rate by 0.5 per cent for corporations with an annual income of Rs200 million to Rs500 million in the federal budget for the fiscal year 2025-26. Similarly, a cut in the withholding tax rate on property purchases has also been proposed.
The government has also proposed a 5% hike in the tax rate on interest income, which will raise the rate from the existing 15% to 20%. High-income pensioners will also be brought under the tax net. Pensioners under the age of 70 whose annual pension is more than Rs10 million will be charged 5% tax. However, those receiving low and middle-range pensions will be exempted from this tax.
Finance Minister Muhammad Aurangzeb, in his budget speech, revealed that the pension scheme had been modified through executive orders over the past few decades, which has put a burden on the national treasury. To rectify the pension scheme and reduce the burden on the kitty, the government has introduced reforms, which include discouraging early retirement and linking pension increases to the Consumer Price Index (CPI).
The finance minister also said that the family pension duration has been restricted to 10 years after the spouse’s death, and multiple pensions have been abolished. Upon re-employment after retirement, an individual will have to choose between pension and salary.
The corporate sector has been given relief in the budget with a reduction in Super Tax and withholding tax on property purchases. The government has decided to reduce the Super Tax rate for the corporate sector. The Federal Excise Duty on the transfer of commercial properties, plots, and houses has been abolished, and the federal government has decided to promote mortgage financing.
Relief has been announced for the corporate sector, with a 0.5% reduction in Super Tax for companies with an annual income of Rs200 to Rs500 million. The withholding tax rate on property purchases has also been reduced. The withholding tax has been reduced from 4% to 2.5% in the first slab, from 3.5% to 2% in the second slab, and from 3% to 1.5% in the third slab.
The Federal Excise Duty on the transfer of commercial properties, plots, and houses has been abolished, which was 7% in the previous budget. The federal government has decided to promote mortgage financing by announcing tax credits for houses up to 10 marlas and flats up to 2,000 square feet.
Similarly, the stamp paper duty on property purchases in Islamabad has been reduced from 4% to 1%.