ISLAMABAD: The federal government has reached an agreement with the International Monetary Fund (IMF) to reduce the income tax rate to just 1% for individuals earning up to Rs 100,000 per month.
This revision comes following a special directive from Prime Minister Shehbaz Sharif, who emphasized providing relief to the salaried class. Initially, under the proposed federal budget 2025-26, an income tax rate of 2.5% was suggested for those earning Rs 600,000 to Rs 1.2 million annually, but now both parties have agreed to reduce it to 1%. For context, the current tax rate for this income slab is 5%.
Tax on Pensions: 5% Tax Approved for Annual Pensions Above Rs 10 Million:
Another major development took place during a meeting of the National Assembly's Standing Committee on Finance, where a 5% income tax was approved on individuals receiving annual pensions exceeding Rs 10 million.According to the Chairman of the Federal Board of Revenue (FBR), there will be no tax on pensions up to Rs 10 million annually. However, any amount above that threshold will be taxable.
During the session, chaired by “Syed Naveed Qamar”, some members objected and argued that individuals receiving Rs 850,000 monthly pensions should also be taxed.
Committee member Muhammad Javed pointed out that the FBR initially wanted to tax pensions starting from “Rs 100,000”, but in reality, only judges receive pensions exceeding Rs 10 million per year.
Strict Action Planned Against Tax Defaulters:
The committee also discussed legal provisions to recover taxes from defaulters. FBR officials proposed that if the institution wins a case at “three levels”—assessment, appellate forum, and high court—then it should have the “immediate authority to recover taxes”.Measures suggested include “freezing bank accounts”, “arresting defaulters”, and “direct recovery actions”.
Committee Chairman “Naveed Qamar” said, “While the right to appeal in the ‘Supreme Court' cannot be denied, it is unfortunate if someone still refuses to pay taxes after losing at three legal levels.” Member “Bilal Azhar Kayani” agreed, stating that such individuals are “mocking the tax system”.
Qamar directed the FBR to “further refine the proposed law” and “present it again the following day” for approval.
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