Income Tax Adjustments

Salaried Taxpayers
The income tax exemption for salaried individuals is expected to remain at Rs. 600,000 per annum. However, adjustments to the tax slabs might affect those earning above this threshold.

Exporters
Exporters, who currently benefit from a fixed tax rate of 1%, will be taxed under the normal regime at 29%, marking a significant shift.

Capital Gains Tax
A flat 15% capital gains tax is proposed for filers on real estate and securities transactions. Non-filers will face a higher rate of 45%.

Withholding Tax on Property Transfer
A new withholding tax regime is proposed for the transfer of immovable property, with varying rates for timely filers, delayed filers, and non-filers.

Advance Tax for Non-Filers
Businesses such as distributors, wholesalers, dealers, and retailers who are non-filers will see an increase in advance income tax from 1% to 2.25%.

Motor Vehicle Registration Tax
The tax structure for motor vehicle registration will change from being based on engine capacity to the vehicle’s value.

Sales Tax Revisions

Textile and Leather Industries
Sales tax for businesses in the textile and leather industries will likely increase from the reduced rate of 15% to the standard rate of 18%.

Mobile Phones
The standard 18% sales tax rate will now be applicable to mobile phones.

Scrap Materials
A sales tax withholding regime is proposed for bronze, coal, and plastic scrap materials.

Iron and Steel Scrap
The current sales tax exemption for iron and steel scrap is expected to be removed.

FATA/PATA Exemptions
Businesses in the newly merged districts of FATA and PATA will no longer enjoy tax exemptions.

Default Surcharge
The default surcharge rate on outstanding taxes is proposed to change from a flat 12% to a dynamic rate linked to the Karachi Interbank Offered Rate (KIBOR) plus 3%.

Sales Tax Timing
Businesses will be required to charge sales tax either at the time of supply or when they receive payment from the customer, whichever comes first.

Best Judgment Assessment
A new “best judgment assessment” concept is being introduced, allowing authorities to estimate tax liability in cases of non-compliance.

Electronic Invoicing
Mandatory electronic sales invoicing is being proposed for all businesses to promote transparency and streamline tax collection.

Implications and Recommendations

These proposals aim to broaden the tax base, simplify the tax regime, and potentially increase government revenue. Taxpayers, especially salaried individuals, exporters, and businesses in specific sectors, should carefully review these changes and consider their impact on tax liabilities. Consulting with a tax advisor is recommended for personalized guidance in navigating the new tax landscape.