The federal government has approved the withdrawal of tax exemption on high-value pensions.
Previously, all pension income was exempt from taxation under the Ordinance. However, under the new proposal, pension amounts exceeding Rs. 10 million annually will now be subject to a 5 percent tax rate for individuals below the age of 70.
This measure, outlined in Division-I, Part-I of the First Schedule, specifically targets wealthier retirees while sparing older and lower-income pensioners from additional tax burdens.
To ensure compliance, a new sub-section under section 149 of the Ordinance has also been proposed, requiring the deduction of advance tax on pension payments that are chargeable.
The government expects this move to generate an additional Rs. 2 billion in revenue.