Here Are the Major Changes in the New Budget

The new budget for the fiscal year 2026-27 has been cleared without any opposition today.

The following are the major changes effective July 1st, 2026:

GDP growth target set at 4% for FY2026-27, with inflation expected at 8.2%.
FBR revenue target fixed at Rs. 15,264 billion, up 17.6% from the outgoing year.
Total federal expenditure set at Rs. 18,771 billion, including Rs. 8,054 billion for markup/debt servicing.
Defence budget increased to Rs. 3,000 billion.
Federal PSDP fixed at Rs. 1,000 billion, while the overall national development program is Rs. 3,675 billion.
BISP budget increased to Rs. 838 billion, with coverage planned for 12 million families and education stipends for 9.2 million children.
PM Apna Ghar Scheme allocated Rs. 71 billion to support housing finance.
Salaried class income tax reduced across several slabs, and the 10% surcharge on salaried individuals is proposed to be removed.
Business income tax relief introduced, including removal of some lower business tax slabs and reduction in super tax for high-income businesses.
Property tax relief proposed for the construction sector, with withholding tax on property purchase and sale reduced for filers.
IT exporters get relief, with the Final Tax Regime extended till June 30, 2029.
Exporters’ tax burden reduced, with professional income tax/minimum tax proposed to be cut from 2% to 1.25%.
Withholding tax on foreign credit/debit card transactions reduced from 5% to 0.5%.
Capital Value Tax on financial assets proposed to be abolished.
Tax relief proposed on sanitary pads and contraceptives.
Fixed tax system proposed for small retailers/shopkeepers under Section 99B.
FBR operating model to be overhauled, including faceless assessment, algorithmic settlement, central data hub, third-party data use, and real-time production monitoring.
Infrastructure spending prioritised, especially roads, rail, transport, water, energy, and urban development.
Major transport projects funded, including N-25, M-6, ML-1 Karachi-Rohri section, Thar Coal Connectivity, and provincial transport schemes.
Water projects allocated Rs. 103.1 billion, including Diamer-Bhasha Dam, Mohmand Dam, and Karachi K-IV.
Energy sector allocated Rs. 116.2 billion, with support for clean and renewable energy projects.
Housing and urban development allocated Rs. 54.6 billion, including climate-resistant housing and digital master plans for major cities.
Health sector development allocated Rs. 25.1 billion.
Higher education allocated Rs. 46 billion, while Danish Schools, community schools/colleges, NAVTTC and skills programs also receive funding.
Government employees’ salaries proposed to rise by 7%, pensions by 7%, and minimum wage by 10%.
EV and vehicle-related measures included, including support for electric motorcycles, rickshaws, cars and buses, while FED is proposed on high-end/luxury vehicles and expensive EVs.
Customs and tariff reforms proposed to reduce input costs, support SMEs, improve exports, and integrate Pakistani industry into global value chains.
Privatization agenda continues, including PIA, DISCOs, GENCOs, banks, insurance companies, hotels, and other state-owned entities.
Digital Pakistan and cashless economy measures expanded, including digital payments, National Data Exchange Layer, AI policy, and digital public infrastructure.
Youth, skills, agriculture, housing finance, fan replacement, and agri-storage financing programs are included as public access and social impact initiatives.

Most Important Changes Overall

Area	Original Finance Bill	Standing Committee Version
Imported mobile phones	No facility to pay PTA/DIRBS tax in instalments	Individuals may be allowed to pay imported-phone tax in instalments, provided all instalments are cleared before the end of the financial year
Mobile phone tax rates	Existing Ninth Schedule rates were not revised	Rates are still not reduced or revised; only the instalment facility is added
Petroleum levy framework	Proposed detailed rules for petroleum and climate support levies, including reporting, recovery and late-payment surcharge	The entire proposed amendment package has been removed
Life insurance and takaful payouts	Tax exemption applied only after completing seven years	Exemption will apply after four years. The 10% tax will now cover payouts after one year but before four years
Social media income tax	5% for resident persons on the ATL and 5% for non-residents	Rate table now simply states a flat 5%, removing the ATL/non-resident distinction from the rate wording
Section 6A fixed-tax regime	Tax became adjustable where turnover exceeded Rs. 200 million	Persons with turnover up to Rs. 200 million may also opt out through a final and irrevocable certificate for Tax Year 2027
Failure to integrate with FBR	Up to 5% of expenditure could be disallowed	Disallowance reduced to 3% of expenditure
Export-oriented businesses	No corresponding exemption	Super tax under Section 4C will not apply where export proceeds exceed 80% of total turnover
Private equity and venture-capital funds	No new exemption in the original proposal	Income exemption introduced where at least 90% of accounting income is distributed, subject to conditions
Airline imports	Sales tax exemption was limited to PIA	Exemption extended to aircraft and parts imported or leased by any Pakistan-registered airline, effective July 1, 2027
Coal imported for power producers	No special 1% minimum value-addition rate	Minimum value-addition tax fixed at 1% where imported coal is supplied directly and exclusively to IPPs
FBR sharing tax returns	FBR could share sectoral sales-tax return data among registered businesses under non-disclosure agreements	This proposed power has been removed
Customs penalty	Certain customs penalty proposed to rise from Rs. 500,000 to Rs. 10 million	Increase reduced to Rs. 5 million
Independent scrutiny committees	No provision for a chartered accountant as a member	Committees may co-opt a chartered accountant as a non-voting member; limitation periods are also protected during committee review
Appointment of external auditors	Taxpayer had no stated right to object to FBR’s first nominee	Taxpayer may object within 15 days; the commissioner may appoint another accountant or cost accountant

Sales Tax Changes

The original bill proposed moving insecticides, fungicides, herbicides, disinfectants and similar products into the Third Schedule. The amendments have removed this category from the proposed list.

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Footwear remains in the Third Schedule, but an exception has been added where a manufacturer sells exclusively through digitally integrated and POS-compliant outlets.

Household utensils are also now limited to those “put up for retail sale.”

The amended Bill also:

adds wheat and rice bran to the relevant sales tax exemption;
removes the original prosecution provision connected with imported goods being resold in the same state beyond the specified threshold;
retains the 3% value-addition tax where manufacturers sell imported goods in the same state.

Major Changes for Cars and EVs

Luxury EV value thresholds changed

The original bill proposed the following FED structure for CBU electric cars, SUVs and pickups imported for personal use:

Customs-inclusive value	Original FED
Up to Rs. 20 million	0%
Above Rs. 20 million to Rs. 30 million	30%
Above Rs. 30 million	40%

The amended bill now replaces the rupee thresholds with dollar-denominated customs values:

Customs value	New FED
Up to $75,000	0%
Above $75,000 to $110,000	30%
Above $110,000	40%

High-engine-capacity vehicle duty increased sharply

The original bill proposed:

40% on imported vehicles above 2,000cc and up to 3,000cc;
41% on imported vehicles above 3,000cc.

The amended bill now has the following:

86% for vehicles of 2,000cc and above but not exceeding 3,000cc;
92% for vehicles above 3,000cc.

This is one of the largest changes in the revised document.

Relief for industrial use of solvents

The original bill imposed FED of Rs. 80 per litre on white spirit and solvent oil without the new detailed concession.

The amended version has exempted white spirit and solvent oil purchased for in-house manufacturing from this duty, subject to licensing, quota, digital invoicing and input/output tax conditions.

Changes Affecting Distributors and Mobile-Phone Businesses

The 0.5% minimum tax rate for distributors and wholesalers of locally manufactured mobile phones remains unchanged.

However, the committee has expanded the list of goods covered by this reduced minimum-tax regime.

It now includes pharmaceuticals, cigarettes, packaged food, dairy products, cosmetics, cleaning products, tissues, aluminium foil, insect sprays and several other categories.

Changes to Penalties

The amended bill has made some penalties tougher and others less severe:

Failure to install a required electronic resource may now attract 1% of turnover or Rs. 1 million, whichever is higher, for the first default, followed by Rs. 2 million for every subsequent quarterly default. The original proposed a flat Rs. 1 million for the first default.
For certain late-filing penalties, the reference point changes from the highest tax payable during the previous three years to the tax payable for the immediately preceding year.
Some proposed increases in penalties and personal liability for company officers have been removed.
An individual may receive relief from specified surcharge conditions by undertaking not to acquire property for six months.

Headline Measures That Have Not Changed

The amended bill now retains the main measures:

revised salaried tax slabs and removal of the 9% salary surcharge;
super tax reduction to 8% for eligible businesses above Rs. 500 million;
abolition of Section 7E deemed-property income tax;
2.75% advance tax on property sales;
1.25% advance tax on property purchases;
exporters’ tax reduction from 2% to 1.25%;
IT exporters’ 0.25% rate extension through Tax Year 2029;
foreign card transaction tax reduction from 5% to 0.5%;
sales tax exemption for sanitary pads, tampons and contraceptives;
the basic 5% withholding system for social-media earnings.

Most Important Correction on Phone Imports

There is still no reduction in imported-phone tax rates, but the revised bill introduces a new facility allowing individuals to pay PTA/DIRBS tax on imported phones in instalments.

All instalments must be paid before the end of the same financial year.