ISLAMABAD:
Preliminary estimates show that the marginalised salaried class paid roughly Rs630 billion in income tax during the just?ended fiscal year – a sum that is 127% more than taxes paid by the real estate sector, which again received a bonanza of 50% reduction in its already low tax burden in the budget.
Compared to cutting the income tax rates in half for the realty sector in the new budget, the government reduced the salaried class burden by almost 7%.
According to provisional estimates, the salaried class paid Rs630 billion in income tax during fiscal year 2025?26, which includes book adjustments. The income tax payments were 4% or Rs24 billion higher than the preceding fiscal year. But the final number may slightly change once the reconciled figures for June are available, according to government officials.
In the previous fiscal year, salaried persons paid Rs606 billion in income tax, according to the annual book of the Revenue Division for fiscal year 2024?25.
The Accountant General of Pakistan Revenue was compiling the book adjustments on account of income tax payments by federal employees and some of the payments being made by the three armed forces, said tax authorities. The AGPR’s reconciled book adjustments were Rs40 billion for the July?May period of the last fiscal year, which are expected to increase to Rs47 billion.
Compared to massive tax contributions by the salaried class, the real estate sector paid Rs278 billion in income taxes under sections 236C and 236K, which deal with withholding tax rates on the sale and purchase of properties. The Rs278 billion payments were Rs51 billion or 17% higher than the last fiscal year – a trend that will now go south after substantial relief to the realty sector.
Secretary Finance Imdadullah Bosal had informed the National Standing Committee on Finance that the government gave Rs52 billion relief to the salaried class. On a monthly income of up to Rs267,000, the tax rate has been reduced by 3% to 20%. On monthly income of up to Rs341,000, the rate has been reduced to 25%, with 160,000 taxpayers in this bracket.
The government has set a 29% rate on up to Rs467,000 per month and also introduced a 32% rate on monthly income of up to Rs583,000. For monthly income over Rs583,000 – Rs7 million plus annually – the government has charged a 35% rate by significantly relaxing the ceiling. This will reduce the annual tax for an individual by Rs257,000.
The threshold for the maximum tax rate of 35% has been increased from Rs4.1 million to Rs7 million annually. But the total annual impact of all these measures is hardly Rs52 billion.
However, compared to this, the federal cabinet, which approved the budget, was informed that Rs115 billion worth of income tax relief had been given to the real estate sector in the new budget.
On sale of property, three slabs have been merged and a single rate of 2.75% has been introduced against a maximum old rate of 5.5%. Under the old rates, the government collected Rs191 billion on the sale of properties in the just?ended fiscal year. This was higher by Rs73 billion or 62%.
On the purchase of property, the tax rate has been reduced from 2.5% to 1.25%. It was the second consecutive year that taxes on the purchase of plots were reduced by the government. In the last fiscal year, the reduction in taxes on purchase had been compensated by increasing taxes on sale.
As a result, withholding tax collection on the purchase of properties decreased by 27% or Rs33 billion during fiscal year 2025?26. The government collected Rs87 billion compared to Rs119 billion a year ago, according to provisional figures.
The Pakistan Muslim League?Nawaz (PML?N)?led government discouraged the real estate sector for two years but has now reversed its policy, which may once again direct the flow of money towards the speculative and unproductive sector of the economy.
The government has also extended special tax incentives to traders who pay very little in income taxes. A new optional fixed income tax scheme has been introduced for retailers, who have also been given a bonanza to pay 1% of their sales in income tax and get exemption from the requirement of installing digital economy instruments and from audit too.
Not only that, the government has also allowed traders to even leave the fixed income tax scheme after one year – a move that may encourage traders to come into the tax net in the first year, whiten their hidden assets due to audit exemption, and then leave the scheme in the next fiscal year.
