ISLAMABAD: Finance Bill 2026 has introduced a tax credit equal to 10 percent of investment made in electronic resources for integration with FBR’s computerized systems to promote digital compliance. Advance tax on payments for foreign television plays and advertisements has been withdrawn.
The federal government has proposed a number of relief, revenue and administrative measures under the Income Tax Ordinance, 2001 in the Budget (2026-27), including reduction in tax rates for salaried individuals, abolition of tax on deemed income from immovable property and rationalization of super tax.
Under the proposed relief measures, income tax rates for salaried taxpayers have been reduced through restructuring of tax slabs. Additional intermediate slabs have been introduced, while the threshold for the highest tax rate of 35 percent has been increased from Rs4.1 million to Rs7 million.
The government has also proposed omission of Section 7E, which relates to taxation of deemed income from capital assets situated in Pakistan, effectively abolishing tax on deemed income from immovable property.
Advance tax on foreign remittances made through debit, credit and prepaid cards has been reduced from 5 percent to 0.5 percent. Tax deducted on e-commerce transactions will become adjustable for sellers having turnover exceeding Rs200 million.
For revenue enhancement, the government has proposed taxation of income received by digital content creators and social media influencers from platforms including YouTube, Facebook, Instagram and TikTok through a withholding tax regime.
The withholding tax structure on services has been revised, with rates for specified services enhanced, independent professionals separately categorized and rates for certain other services rationalized. The minimum tax rate for distributors, dealers, sub-dealers and wholesalers of specified sectors has also been increased from 0.25 percent to 0.5 percent, subject to documentation requirements.
The government has proposed an algorithmic cross-matching system for banking and tax information, under which banking companies and electronic money institutions will electronically provide information regarding high-value deposits and withdrawals for comparison with tax declarations.
To strengthen enforcement, the FBR has been empowered to require specified persons to install electronic resources and integrate business systems for real-time reporting of transactions. Penalties for non-compliance, including failure to furnish statements, integration failures, late inclusion in the Active Taxpayers List and incorrect withholding tax claims, have also been enhanced.
Under streamlining measures, a National Faceless Centre will be established for conducting faceless audits, assessments and appeals through technology-based processes. An Algorithmic Settlement Mechanism has also been introduced to allow taxpayers to settle identified discrepancies through an automated system.
The government has further proposed establishment of an Independent Case Scrutiny Committee, reforms in Alternative Dispute Resolution (ADR), mandatory electronic filing of machine-readable financial statements by companies and creation of Directorate General (Field Compliance), Inland Revenue to strengthen tax administration.
Copyright Business Recorder, 2026
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