With Budget 2025–26 set to be unveiled soon, the government is reportedly preparing to introduce significant tax reforms aimed at expanding the national tax base and eliminating various longstanding exemptions, as per the recommendations of the International Monetary Fund (IMF).
According to sources familiar with the matter, a series of new taxation measures are being considered. Among the most notable proposals is the imposition of taxes on agricultural income, earnings from freelancing, and digital platforms — sectors that have largely remained outside the formal tax net in Pakistan.
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The proposed reforms reflect the government’s commitment to fiscal consolidation, as demanded by the IMF. Authorities are also mulling over:
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Abolishing the Federal Excise Duty (FED) on property transactions
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Reducing taxes on beverages and cigarettes
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Taxing fertilisers, pesticides, and bakery items, which are currently exempt
Additionally, the government plans to end tax exemptions in the former FATA region, proposing a 12% tax in those areas to align them with the rest of the country’s fiscal framework.
While broadening the tax base, the budget may also bring limited relief for the salaried class. Proposals currently under review include:
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10% income tax relief for salaried employees
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A 5% to 7.5% increase in pensions
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A 30% allowance hike for government employees in grades 1 to 16
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A potential merger of the ad-hoc relief allowance into the basic salary
These measures aim to mitigate the impact of inflation on low and middle-income earners.
In a move likely to impact investors, the government is also considering an increase in the Capital Gains Tax (CGT) on shares and real estate transactions.
The IMF has repeatedly stressed the importance of formalising the economy, reducing tax evasion, and increasing revenue to ensure macroeconomic stability.
As the budget announcement nears, stakeholders from various sectors — including freelancers, agricultural producers, and salaried employees — await clarity on how these reforms will impact their earnings and financial planning.
