The Finance Act 2026 introduces revised income tax rates, expands digital tax administration, creates new tax provisions for digital income and insurance proceeds, and amends compliance, litigation and business tax rules under the Income Tax Ordinance, 2001.
Pakistan’s Federal Board of Revenue (FBR) has published the Finance Act 2026, enacted on 26 June 2026, introducing a wide range of amendments to the Income Tax Ordinance, 2001 covering personal taxation, digital tax administration, withholding taxes, compliance and dispute resolution.
Business taxation
The Finance Act provides a 10% tax credit of the invested amount for businesses that integrate their systems with the FBR for real-time production monitoring or electronic recording of sales.
Tax imposed on certain persons with annual turnover exceeding PKR 200 million is changed from a final tax to an adjustable tax.
Personal income tax
The Act restructures the income tax slabs for individuals, including salaried persons, reducing tax rates and increasing the income threshold for the top 35% tax rate from PKR 4.1 million to PKR 7 million.
The revised tax schedule is:
| Taxable income | Tax rate |
| Up to PKR 600,000 | 0% |
| Above PKR 600,000 | Progressive rates |
| Above PKR 7 million | 35% |
The Act also abolishes Section 7E of the Income Tax Ordinance, 2001, removing the deemed income tax on capital assets.
Digitalisation and tax administration
The Finance Act introduces several measures to expand digital tax administration.
A National Faceless Centre is established to conduct audits, assessments and other tax proceedings electronically. The identities of tax officials handling proceedings through the centre will remain confidential from taxpayers.
A new Algorithmic Settlement Mechanism allows system-generated settlement offers to be issued at any stage before an assessment order. Taxpayers accepting an offer and paying the specified amount may have their proceedings abated.
From tax year 2026 onwards, companies must file financial statements accompanying their income tax returns exclusively in an electronically readable file format.
Banks are required to report information to a Central Data Hub on account holders whose deposits or withdrawals exceed PKR 100 million during a six-month reporting period. The information will be used for algorithmic cross-matching.
Withholding taxes and new tax provisions
The Act inserts Section 154B, introducing a 5% withholding tax on revenue received from social media platforms by digital content creators and influencers.
The withholding tax is treated as:
- Minimum tax for resident taxpayers; and
- Final tax for non-resident taxpayers.
The Finance Act also introduces Section 7G, imposing a final tax on payouts, surrender values or maturity proceeds from life insurance and family takaful policies.
The applicable rates are:
| Payment period | Final tax rate |
| Within one year of policy issuance | 15% |
| Between one and four years | 10% |
Payouts resulting from death or disability remain exempt.
Super tax
The Act revises Super Tax under Section 4C.
A 10% rate applies to banking companies, fertiliser manufacturers and certain other specified sectors exceeding the prescribed income thresholds.
An 8% rate applies to other persons with income exceeding PKR 500 million.
Property taxation
For immovable property acquired through inheritance, the acquisition cost for tax purposes will be the fair market value of the property at the time it is transferred to the beneficiary.
Litigation and dispute resolution
The Act establishes an Independent Case Scrutiny Committee to review litigation decisions.
Under the new rules, the Commissioner may file references before High Courts or appeals to the Supreme Court only after obtaining the committee’s approval. The committee includes a retired judge and a legal expert.
Other measures
The Finance Act provides that no surcharge is payable on income tax imposed under Division I of Part I of the First Schedule.
The Act also contains related amendments to support electronic tax administration, digital compliance, and automated risk assessment as part of the FBR’s modernisation programme.
Earlier, Pakistan’s government presented its Federal Budget for FY2026-27 on 12 June 2026.
