Pakistan Unveils Balanced Budget for Fiscal Year 2025-26, Focused on Relief, Industry, and Sustainable Growth

Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue, announced a balanced budget for fiscal year 2025-26, aiming to provide public relief, promote industry, curb government expenditures, enhance revenues, and ensure fair tax enforcement. The budget is designed to foster sustainable growth and drive an export-led economy, despite regional uncertainty.

Key Takeaways:

• The budget has reduced the income tax rate for those earning up to Rs3.2 million from 2.5% to 1%, benefiting the salaried class.
• Pension commutation and gratuity are exempt from tax, while individuals receiving pensions above Rs10 million will be taxed. Those over 75 years of age are fully exempt.
• The sales tax on imported solar panel components has been reduced from 18% to 10%, and will apply to only 46% of imported items, resulting in a 4.6% increase in the price of imported solar panels.
• Opportunistic hoarding and artificial price hikes will be strictly punished, with the FBR and provincial governments coordinating efforts.
• The powers of the FBR to arrest individuals have been restricted, with a court warrant required for arrests involving Rs50 million or more.
• Restrictions on large asset purchases by undocumented individuals have been relaxed, exempting residential houses up to Rs50 million, commercial plots or properties up to Rs100 million, and vehicles worth up to Rs7 million.
• Capital gains tax will not apply to property sold after six years of purchase, provided it was acquired before July 1, 2024.
• The government has proposed imposing sales tax on the import of raw cotton and yarn to reduce the price gap between imported and local products and support the domestic agriculture sector.
• New tax measures aim to target high-income segments and wealthier businesses, while preserving competitiveness for export-oriented industries.

Statistics:

• The income tax rate for those earning up to Rs3.2 million has been reduced from 2.5% to 1%.
• The sales tax on imported solar panel components has been reduced from 18% to 10%.
• Over 10 million low-income families will benefit from a significant increase in the budget of the Benazir Income Support Programme (BISP) from Rs592 billion to Rs716 billion.
• Loans worth approximately Rs14 billion have been provided to over 193,000 women under the Women Inclusive Finance Programme.

Sources:

• Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue, speech, dated 25th June 2024.
• Government of Pakistan's Budget Announcement, 2025-26.