Pakistan Approves Rs17,573 Billion Federal Budget for FY 2025-26

Strategic Insights -

The National Assembly of Pakistan has passed the Finance Bill, approving a Rs17,573 billion federal budget for the fiscal year 2025-26. The budget sets a tax collection target of Rs14,131 billion and allocates significant funds for debt servicing, defense spending, and non-tax revenue. Notable updates include reduced sales tax rates on solar panels and the introduction of a Carbon Levy.

Key Takeaways:

  • The approved budget size is Rs17,573 billion, with a tax collection target of Rs14,131 billion and non-tax revenue of Rs5,147 billion.
  • Rs8,206 billion will be distributed to the provinces as per the NFC Award.
  • Major allocations include Rs8,207 billion for debt servicing and Rs2,550 billion for defense spending.
  • Income tax exemptions are granted 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 exempted from tax on pensions, along with government-affiliated entities and foundations that remain tax-free.
  • The sales tax rate on solar panels has been reduced from 18% to 10%.
  • Tax rates on salaried individuals progress from 1% for incomes between Rs600,001 and Rs1.2 million to 35% for incomes above Rs4.1 million annually.
  • A 5% income tax has been introduced on pensions exceeding Rs10 million per year.

Statistics:

  • Budget size: Rs17,573 billion.
  • Tax collection target: Rs14,131 billion.
  • Non-tax revenue: Rs5,147 billion.
  • Allocation for provinces: Rs8,206 billion.
  • Debt servicing allocation: Rs8,207 billion.
  • Defense spending: Rs2,550 billion.
  • Number of income tax-exempted institutions: 106.
  • Sales tax rate on solar panels: 10%.
  • Tax-free annual income threshold: Rs600,000.

Sources:

  • The News International [1]
  • Dawn [2]
  • The Express Tribune [3]