The FBR has imposed a final tax of up to 15% on certain life insurance payments, from faceless audit, assessment and appeal to algorithmic settlement, 5% tax on social media income, a new system for digital monitoring of banking transactions, while also increasing fines for violation of tax laws.
For failure to install, use or maintain electronic resources, in the event of the first default, a fine of one percent of the turnover or Rs 1 million, whichever is higher, will be imposed, while a fine of Rs 2 million will be imposed for each subsequent quarterly default. The advance tax rate on payments through international credit, debit or prepaid cards has also been reduced from 5% to 0.5%. In addition, advance tax on TV dramas and advertisements has been abolished.
The salaried class has been given relief in tax rates, according to which there will be no tax on annual income of less than 6 lakhs, while the 9% surcharge has been abolished on income of more than 10 million rupees, the advance tax rate on the purchase and sale of property has been reduced, the tax on international cards has been reduced from 5% to 0.5%, the super tax has been abolished on most people with income up to 500 million rupees, while the tax and compliance system has been further tightened in the sectors of big business, exporters, services, e-commerce and electronic integration. A comprehensive system of faceless audit, assessment, appeal and jurisdiction has been introduced in the income tax system.
The board will be able to establish a National Faceless Center, where audit, assessment and quality control will be done by separate officers for a specific case and tax year, while all communication with taxpayers and their representatives will be through electronic means.
In case of need for a hearing or affidavit, an e-hearing will be held and the identity of the concerned officer will be kept confidential.
According to a document available to Express, the Federal Board of Revenue (FBR) has released details of major amendments made in the Income Tax Ordinance 2001. The Finance Act 2026 has changed the map of the country’s tax system. Under the major amendments to be made by the government in the Income Tax Ordinance 2001 under the Finance Act 2026, a comprehensive system of faceless audit, assessment and appeal has been introduced in the income tax system. Government
According to the FBR, the proceedings in the National Faceless Center will be conducted through electronic means, while the identity of the concerned tax officer will be kept confidential during the faceless proceedings. An algorithmic settlement mechanism has also been introduced for the settlement of tax disputes, under which the taxpayer will have 10 days to accept the settlement offer. The approval of an independent case scrutiny committee has also been made mandatory before filing a reference in the High Court and an appeal or review in the higher courts.
Under the Finance Act, a final tax of up to 15 percent has been imposed on certain life insurance payments. The tax rate on life insurance payments within one year will be 15 percent, while payments after one year and before the completion of four years will be 10 percent tax. However, in case of death or disability, life insurance payments will be exempt from tax.
Tax on social media income
Similarly, a 5 percent withholding tax has been imposed on income received from social media platforms, which will be considered the minimum tax for a local person.
Tax rate change for salaried class
The tax rate for the salaried class has also been reduced. The tax rate has been set at zero on annual taxable income up to Rs 6 lakh, while the rate will be 35 percent on taxable income above Rs 7 million.
The 9% surcharge on income above Rs 10 million for salaried individuals has also been abolished, however, the 10% surcharge will remain for other individuals and associations of persons.
On the other hand, tax on dead income has been abolished under Section 7E, significant changes have also been made in the e-commerce sector and e-commerce tax will be adjustable on turnover above Rs 200 million, while those with turnover up to Rs 200 million have been given the option to adopt the normal tax system.
A deduction of 3% of the expenditure will be made for non-integration with the FBR’s computerized system, while a 10% tax credit facility has been provided on investment in electronic resources.
New restrictions on bank transactions
New provisions have also been introduced regarding the banking system, under which information on bank deposits or withdrawals exceeding Rs 100 million will be provided to the Central Data Hub and banking data will be compared with tax information on an algorithmic basis, while the authorized shipping agent for non-resident shipping has been made liable for tax obligations.
Advance tax rate changed on sale of property
Advance tax rates on purchase and sale of immovable property have also been changed. The advance tax rate on sale of property has been fixed at 2.75 percent while on purchase it is 1.25 percent.
Tax rate on international credit, debit and prepaid cards from five percent to 0.5 percent
Advance tax on international credit, debit and prepaid cards has been reduced from 5 percent to 0.5 percent, while advance tax on TV dramas and advertisements has been abolished.
The rate of withholding tax on certain services in the services sector has been increased from 6% to 7%. Withholding tax on independent professional services has been fixed at 15%, terminal and port operating services at 12%, and other unspecified services at 14%. Capital gains tax on sale of debt securities has also been increased from 15% to 20%.
Introducing a new system for online wallet institutions
A new system has been introduced for banks and electronic financial institutions, under which fixed information of account holders having deposits or withdrawals of more than Rs 10 crore and not Rs 1 crore during the reporting period will be electronically uploaded to the central data hub.
This information will be compared with tax and banking data on an algorithmic basis and in case of gross irregularities, the matter can be referred to the Board’s Compliance Risk Management System.
Shipping companies
In respect of non-resident shipping, the authorized shipping agent is designated as the representative of the non-resident shipowner, charterer or operator and is jointly and severally liable for taxes and related obligations.
A return must be submitted for each ship or voyage on the gross freight and related amounts and return filing and electronic verification of tax payment will be necessary before port clearance. The government has also been empowered to reduce the rate of certain withholding taxes up to one percent on the basis of economic viability, subject to certain conditions and restrictions and all such reductions will have to be submitted to the National Assembly in the relevant financial year. Govt
Inherited property
In respect of inherited immovable property, the cost thereof shall be fixed at the then fair market value as determined under section 68. A limited liability partnership (LLP) is included in an association of persons, while in certain circumstances the profits received by a member from the LLP will be included in the member’s income.
Regarding capital gain, the procedure for calculation and determination of capital gain has been set by the National Clearing Company of Pakistan for certain banking, mutual fund and insurance institutions. Banks will have to deduct tax on certain capital gains from investments in foreign currency and through non-resident accounts.
Companies must file financial statements with returns for tax years 2026 and later only in an electronically readable file format.
The FBR has also introduced the option to appoint experts from a panel nominated by the Board for re-audit, revaluation of inventory or actuarial valuation of certain complex or multi-transaction accounts.
Important changes regarding super tax
Important changes have also been made regarding super tax under the Finance Act, 10 percent on income of banking company above Rs 15 crore, 10 percent on income above Rs 15 crore of certain specified persons and 10 percent super tax on income above Rs 15 crore of a person deriving income from sale of fertilizer will remain.
For other individuals, the super tax rate has been fixed at 8% on income above Rs 50 crore. However, for exporters with income above Rs 50 crore, if the export income received for the tax year is more than 80% of their gross turnover, the super tax is completely waived.
Reduction in tax rate on purchase and sale of property
Advance tax rates on sale and purchase of immovable property have also been reduced. Advance tax is fixed at 2.75% of the gross amount received on sale or transfer of property and 1.25% of the fair market value on purchase.
Failure to integrate the IT platform or share data on the part of the affiliated entity will attract a penalty of Rs.5 lakh for the first default and Rs.10 lakh for each subsequent default. Submission of audited financial statements in the form of image, scanned document, password protected or inaccessible file will be treated as blank or incomplete document.
Claiming credit in excess of tax deducted and collected at source will also attract a penalty equal to the same amount.
Increase in surcharge on those not included in the tax list
The surcharge has been increased for persons not included in the list of active taxpayers, but the individual may be exempted from this requirement by giving an affidavit before the Commissioner that he will not purchase, acquire or acquire ownership or beneficial interest in any property for six months from the date of submission of the assurance.
Abolition of advance tax for exporters
One per cent adjustable advance tax for exporters under section 147(6C) has been abolished Advance tax rate on exports has been fixed at 1.25 per cent minimum tax while the lower tax rate of 0.25 per cent on exports of IT and IT related services has been extended till 2029.
The FBR has also made other administrative amendments, including setting up a new Directorate General for Field Compliance and allowing auditors, audit mentors and sectoral experts to provide information subject to certain conditions, while the scope of special procedures for small traders and vendors has also been widened.
The FBR has said that the board will provide all possible assistance in the implementation of the newly introduced legal provisions and ensure that the enforcement provisions are implemented in a fair manner. For this purpose there will also be redressal committees comprising representatives of the business community and FBR.