Here Are the Salient Features of Budget 2026-27

The federal government has announced the budget for the fiscal year 2026-27.

Finance Minister Muhammad Aurangzeb presented the Federal Budget in the Parliament House today for the fiscal year 2026-27.

• The total federal budget outlay is Rs 18.8 trillion.
• The government has announced a fixed tax “Asaan Scheme” for retailers with annual sales up to Rs200 million, under which eligible retailers will either pay a minimum tax of Rs. 25,000 per year or 1% of sales, whichever is applicable. The move is aimed at simplifying tax compliance for small and mid-sized retail businesses while expanding the tax net.
• The government has linked penalties for non-compliance with digital integration requirements to inflation, meaning penalties will adjust upward over time instead of remaining fixed.
• The federal government has proposed a fixed tax system for small retailers and shopkeepers under Section 99B of the Income Tax Ordinance. The new system will apply to small shopkeepers with annual sales of less than Rs. 10 million. They will pay 0.5 percent of annual sales as tax.
• The budget also introduces a Federal Excise Duty (FED) of Rs. 80 per litre on petroleum-based solvents such as white spirit and naphtha, with officials stating that these products are often blended with fuel for consumption, creating loopholes in the system.
• To curb tax avoidance practices, a new tax has been proposed on sham or misuse-based life insurance policies, targeting schemes designed to exploit regulatory arbitrage rather than genuine insurance coverage.
• The budget further proposes FED on high-value imports, including vehicles above 2000cc engine capacity and electric vehicles valued above Rs. 20 million, signaling tighter taxation on luxury imports.

Some relief measures have also been introduced, including the removal of import duties on Active Pharmaceutical Ingredients (APIs) used in critical disease treatments such as cancer, aimed at reducing healthcare costs.

• For the tobacco and vaping sector, the government has increased FED on e-liquids for electronic cigarettes to Rs16,500 per kg, up from Rs10,000 per kg, while also removing the previously applied high retail price-based tariff of up to 65%.
• In the digital economy, the government has introduced withholding tax on income from social media platforms such as YouTube, Instagram, and TikTok, with banks assigned to deduct the tax at source.
• The minimum tax rate for distributors and wholesalers has been increased from 0.25% to 0.5%, further tightening the taxation framework for supply chain businesses.

The overall package as a mix of compliance tightening, luxury taxation, and targeted relief measures under the FY2026–27 budget framework.

More info will be shared shortly.