In the new budget, the government has proposed changes in customs duty, additional customs duty and regulatory duty on 400 items related to the manufacturing sector. In the next fiscal year, the government has set an Rs7,004 billion revenue target for the FBR, while Rs2,000 will come from non-tax revenues. The government expects $32 billion in remittances from overseas workers.
Private sector employees will also benefit as the government has increased tax exemption for salaried persons by moving up the lowest tax slab from Rs600,000 to Rs12,00,000. This means people being paid less than Rs100,000 in salary will be exempted from tax cuts.
Tax exemption benefit has also been extended to businesspersons and association of person by moving the lowest slab up from Rs600,000 to Rs400,000. The tax on the profit from saving certificates has been reduced from 10% to 5%.
A fixed tax regime has been introduced for retailers and tax would be collected with the electricity bill. The retailers will be paying between Rs3,000 and Rs10,000 per month in fixed sales tax. They will be asked no questions by the Federal Bureau of Revenue officials.
People earning over Rs300 million per annum (Rs25 million per month) will be slapped with a new supertax of the rate of 2%. The federal government has proposed a 1% ‘deemed rental income’ tax on property valued at Rs25 million or above.
People who own a property other than the house they live in and valued at Rs250 or above will be deemed to have received rental income from that property. They will be taxed 1% of the “fair market value” of the property. However, one home owned by everyone will be exempted from this tax. The government has also proposed a 15% tax on capital gain from immovable property in case of one-year holding period. With every passing year after the holding period the rate will decrease by 2.5% and will drop to zero after six years, the finance minister announced.
This means that if you buy a property and sell it within one year, you will be paying 15% tax, and if you sell in the second year you will be paying 12.5% tax and so on.
The government has also increased advance tax rate from 1% to 2% for
filers and to 5% for non-filers. The ban on the import of vehicles will continue to be in place.
The advanced tax on vehicles with engine capacity of 1600CC or above has been increased. In the case of electric engine, 2% advance tax will be imposed.
The tax rate for non-filers has been increased from 100% to 200%.The government has pushed up the tax rate for banking companies from 39% to 42%, but this also includes the supertax.
Payments made outside Pakistan using credit, debit, or pre-paid cards will incur advance tax at the rate of 1% for filers and 2% for non-filers.
Sale tax exemption has also been granted to charity hospitals on their imports. Donations to charity hospitals have also been exempted.
Non-profit and charity hospitals with 50 beds or above will be exempted from tax on electricity and all local supplies. The government has proposed changes in customs duty, additional customs duty and regulatory duty on 400 items related to the manufacturing sector.
The finance minister said that on such items the government has revised the regulatory duty regime and either abolished the regulatory duty or reduced it. However, he added that the government has also imposed regulatory duty on several items to protect local manufacturers.
To tackle smuggling and tax pilferage, Ismail said that the government has decided to impose a “track and trace” system for cigarette companies. So far, the system has been installed in three companies.
Through the implementation of the system, Ismail hoped to raise another Rs50 billion in tax from cigarette companies, taking the total from Rs150 billion to the targeted Rs200 billion.
