Islamabad: The Finance Act 2025 has officially come into effect from July 1, 2025, introducing a range of new taxation measures and placing strict economic restrictions on non-filers as part of the government’s broader efforts to expand the tax base and boost revenue collection.
Among the most significant changes is the bar on economic transactions by “ineligible persons”—a term used for individuals not appearing on the active taxpayer list. Under Section 114C of the Income Tax Ordinance, non-filers will now face limitations on financial activity above certain thresholds, effectively discouraging tax evasion and incentivizing formal registration.
The Federal Board of Revenue (FBR) has been granted enhanced powers to enforce these restrictions. Banks and financial institutions will now be required to verify the tax status of individuals before processing certain transactions. Moreover, the FBR and banks are mandated to exchange information about high-risk individuals to ensure tighter compliance.
In addition to the crackdown on non-filers, the Finance Act 2025 introduces new levies and revised tax rates across multiple sectors:
Withholding tax on cash withdrawals by non-filers has been increased from 0.6% to 0.8%.
A Digital Presence Proceeds Tax has been imposed on foreign vendors earning from digital services supplied into Pakistan.
A New Energy Vehicles Adoption Levy has been applied to both imported and locally assembled EVs.
Excise duty of 10% has been introduced on day-old chicks in the poultry sector.
Tax on dividends from mutual funds earning profit on debt has been raised from 25% to 29%.
Profit on government securities earned by institutional investors will now be taxed at 20%, up from 15%.
In a move to streamline real estate transactions, the government has abolished the 3% Federal Excise Duty on the allotment or transfer of residential and commercial properties. Furthermore, withholding tax rates on property purchases (Section 236K) have been reduced, while those on property sales (Section 236C) have been increased.
The Finance Act 2025 also outlines provisions for enforcement. In cases involving tax fraud of over Rs50 million, a three-member FBR committee may authorize arrest warrants—provided the accused is evading investigation or is suspected of tampering with evidence. However, arrests cannot be made until an inquiry is completed, and accused individuals retain the right to apply for bail under the Code of Criminal Procedure.
While the salaried class has received modest relief in the form of tax adjustments, much of the burden of new revenue generation measures is expected to fall on indirect taxation and withholding mechanisms—aimed at bringing Pakistan’s informal economy into the documented net.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
