The National Assembly of Pakistan has officially approved the Rs17,573 billion federal budget for the fiscal year 2025–26, passing the Finance Bill with a majority vote. All cut motions from the opposition were rejected during Thursday’s session.
Under the approved budget, the Federal Board of Revenue (FBR) has set a tax collection target of Rs14,131 billion, while non-tax revenue is expected to reach Rs5,147 billion. As per the NFC Award, Rs8,206 billion will be distributed to the provinces. Major allocations include Rs8,207 billion for debt servicing and Rs2,550 billion for defense spending.
The budget grants income tax exemptions to 106 institutions, including charitable trusts, educational bodies like LUMS and COMSATS, health foundations like Shaukat Khanum, and development organizations like the Aga Khan Network. Former presidents and their widows are also exempted from tax on pensions. Several government-affiliated entities and foundations will remain tax-free.
One notable update is the revised sales tax rate on solar panels, which has been reduced from a proposed 18% to 10%. The parliament also approved 14 amendments to the Customs Act, introduced a Carbon Levy, and passed several tax-related reforms, despite opposition protests.
For salaried individuals, annual incomes up to Rs600,000 remain tax-free, while incomes between Rs600,001 and Rs1.2 million are taxed at 1%. Tax rates progressively increase with income brackets, peaking at 35% for incomes above Rs4.1 million annually. Additionally, a 5% income tax has been introduced on pensions exceeding Rs10 million per year.
A new measure also grants a special committee the authority to approve arrests in tax fraud cases involving amounts over Rs50 million. However, individuals cooperating with investigations will be protected from arrest. Fraud through forged invoices or false information will be treated as sales tax fraud under the new rules.