ISLAMABAD: The government has enforced new taxation measures of Rs339.5 billion, taken through Finance Act 2025, from July 1, 2025, including increase in withholding tax rate on “profit on debt”, taxation of domestic e-commerce, bar on economic transactions of “ineligible persons, tax relief for the salaried class and heavy indirect taxation on general public.
From July 1, 2025, the reduction in customs duties, regulatory duties and additional customs duties would be applicable on the import of inputs, raw materials, semi-finished products and finished goods for all sectors/industries except auto sector.
The Federal Board of Revenue (FBR) has issued Finance Act 2025 incorporating amendments made in the Finance Bill 2025.
New taxation measures announced
Beside increase in withholding tax rates on different financial transactions, the withholding tax rate on cash withdrawal from banks by non-filers has been increased from 0.6 percent to 0.8 percent. The Seventh Schedule (Banking Schedule) of the Income Tax Ordinance has also been amended regarding taxation of banks and special provisions relating to banking business.
The FBR has also imposed bar on the financial transactions of the “ineligible persons” or non-filers as per thresholds/limits provided in the Finance Act 2025. For the purposes of Section 114C of the Income Tax Ordinance, the threshold of the economic transactions would be applied in respect of ineligible persons under Finance Act 2025.
The government has also imposed a “New Energy Vehicles Adoption Levy” on locally manufactured as well as imported vehicles.
The Finance Act 2025 has imposed a Digital Presence Proceeds Tax. Every foreign vendor having significant digital presence in Pakistan shall be charged to “Digital Presence Proceeds Tax” on proceeds of every supply made from outside Pakistan of digitally ordered services or goods irrespective of whether delivered digitally or physically.
The government has withdrawn three percent Federal Excise Duty on allotment or transfer of residential and commercial properties.
The withholding taxes under Section 236K on purchase of property have also been reduced. However, withholding rate under Section 236C for the sellers has been increased.
Under Finance Act 2025, the FBR and banks will exchange banking and tax information related to high-risk persons.
The additional taxation measures included federal excise duty of 10 per cent on day old chicks (DOC) of poultry sector; rate of tax increased from 25 percent to 29 percent on dividend received by a company from mutual fund deriving income from profit on debt and withholding tax has been increased from 15 to 20 percent on profit on government securities paid to any person (institutional investors) other than an individual.
The finance bill revealed that no arrest under this section shall be made before the completion of inquiry. The accused arrested may approach the competent court for his release on bail under the provisions contained in sections 497 and 498 of the Code of Criminal Procedure, 1898.
The purpose of prosecution under the provision of section 37A and 37B of this Act shall remain to create sufficient deterrence against tax fraud and provide for retribution for commission of tax fraud.
A three-member committee of the FBR would authorise the commissioner to issue warrant of arrest against a person involved in tax fraud in cases where tax loss exceeds Rs50 million.
The said arrest would be made in a situation where the accused is intentionally or willfully not joining the investigation after three notices; accused attempting to abscond or there are sufficient grounds that the accused would temper with the evidence.
Copyright Business Recorder, 2025
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