Finance Minister Muhammad Aurangzeb presented the budget for fiscal year 2024-25 on the floor of the National Assembly on Wednesday amid raucous proceedings with the opposition registering its protest with sloganeering and desk-thumping.

Pakistan’s budget for the upcoming year aims for a modest 3.6 per cent GDP growth, and sets an ambitious Rs13 trillion tax collection target, raising taxes on salaried classes and removing tax exemptions for the rest.

Rise in minimum wage, increase in taxes

During his speech, the finance minister said there was a proposal for the minimum wage to be increased to Rs37,000 from Rs32,000.

He also said that salaries for government servants from grades 1-16 would be increased by 25pc and by 20pc for those in grades 17-22, along with an increase in pensions for retired employees by 15pc.

Meanwhile, some of the notable changes in taxes/duties introduced by the government in budget 2024- 25, which will interest you, are that rates have changed for non-salaried individuals.

There is no income tax if the annual income is up to Rs600,000.

Beyond this threshold, tax rates for non-salaried individuals have five taxable slabs with progressive tax rates ranging from 15-45pc.

  • Taxable income not exceeding Rs600,000: 0pc
  • Taxable income between Rs600,000-1,200,000: 15pc of amount exceeding Rs600,000
  • Taxable income between Rs1,200,000-1,600,000: Rs90,000+20pc of the amount exceeding Rs1,200,000
  • Taxable income between Rs1,600,000-3,200,000: Rs170,000+30pc of the amount exceeding Rs1,600,000
  • Taxable income between Rs3,200,000-5,600,000: Rs650,000+40pc of the amount exceeding Rs3,200,000
  • Taxable income exceeding Rs5,600,000: Rs1,610,000+45pc of the amount exceeding Rs5,600,000

For salaried individuals, beyond the threshold of Rs600,000 per annum, there are five taxable slabs ranging from 5-35pc.

  • Taxable income not exceeding Rs600,000: 0pc
  • Taxable income between Rs600,000-1,200,000: 5pc of amount exceeding Rs600,000
  • Taxable income between Rs1,200,000-2,200,000: Rs30,000+15pc of the amount exceeding Rs1,200,000
  • Taxable income between Rs2,200,000-3,200,000: Rs180,000+25pc of the amount exceeding Rs2,200,000
  • Taxable income between Rs3,200,000-4,100,000: Rs430,000+30pc of the amount exceeding Rs3,200,000
  • Taxable income exceeding Rs4,100,000: Rs700,000+35pc of the amount exceeding Rs4,100,000

Separately, there will be higher tax rates for late-filers.

Documents shared by the government said that non-filers were presently subjected to higher tax rates to make their cost of doing business higher as well as to compel them to file their returns.

However, now a new tax rate was introduced for a new category: late-filers.

The government defined late-filers as those who become filers after the due date of filing tax returns only for the sake of a specific transaction to avoid higher rates for non-filers.

For such late-filers, a new tax rate was introduced, at a higher rate as compared to filers but lower than non-filers.

Outlining the income tax on immovable properties, the government also set out progressive tax rates on the purchases and sales of properties for three categories of individuals: filers, late filers and non-filers.

On the purchase of property, the rates of tax will be:

For filers:

  • 3pc for values of properties up to Rs50 million
  • 3.5pc for values of properties between Rs50m-100m
  • 4pc for the value of properties above Rs100m

For late-filers:

  • 6pc for values of properties up to Rs50 million
  • 7pc for values of properties between Rs50m-100m
  • 8pc for the value of properties above Rs100m

For non-filers:

  • 12pc for values of properties up to Rs50 million
  • 16pc for values of properties between Rs50m-100m
  • 20pc for the value of properties above Rs100m

On the sale of immovable properties, the budget proposed progressive advance tax rates at the source for the three categories.

For filers:

  • 3pc for values of properties up to Rs50 million
  • 4pc for values of properties between Rs50m-100m
  • 5pc for the value of properties above Rs100m

For non-filers: The rate is 10pc for properties of any value.

For late-filers:

  • 6pc for values of properties up to Rs50 million
  • 7pc for values of properties between Rs50m-100m
  • 8pc for the value of properties above Rs100m

The budget also proposed a flat 15pc rate of tax on gains from the disposal of immovable property acquired on or after July 1, 2024, by filers regardless of the holding period.

For non-filers, the government proposed progressive tax rates based on the prescribed slab rates in Division I of Part I of the Income Tax Ordinance’s First Schedule, with a minimum tax rate of 15pc.

Cracking down on non-filers

The government also proposed a host of other measures to crack down on non-filers and compel them to file tax returns, apart from the blocking of their mobile SIMs and severing their utility connections.

The budget suggested that the exit of such individuals from Pakistan be barred except for Hajj and Umrah travellers, minors, students and overseas Pakistanis.

Penalties were proposed for entities failing to fully disclose relevant particulars, submitting incomplete information in their tax returns or failing to file returns on discontinuation of their business.

Further, a penalty of sealing of shop was proposed for traders and shopkeepers who failed to register under a scheme.

The government also proposed that the failure by a shopkeeper or trader to register be made an offence punishable on conviction with imprisonment for six months or with fine, or both.

Broadening scope of withholding tax

The government also said that advance tax was currently collected on sales to dealers, distributors, wholesalers and retailers of certain specified sectors.

Now, it proposed that such tax would be collected from all sectors of the economy so that it is expanded to the entire supply chain comprising all distributors, wholesalers, dealers and retailers with the aim to document traders.

Further, the rate for non-filers for dealers, distributors and wholesalers was enhanced from 0.2pc to 2pc and for retailer non-filers from 1pc to 2.5pc for the purpose of documentation of traders and to discourage non-filing.

Higher taxes on mobile phones

The government also proposed doing away with the current regime of sales tax for mobile phones which utilised a slab-based structure depending on pricing and had nominal sales tax as shown in Table II of the Ninth Schedule of the Sales Tax Act, 1990.

Instead, the government has proposed charging a flat 18pc ad valorem sales tax on all mobile phones up to the value of $500 for the three categories of imported completely built, imported semi-built and locally manufactured completely built.

For cellphones costing above $500, the sales tax rate will be:

  • 25pc ad valorem for imported completely built
  • 18pc for imported semi-built and locally manufactured completely built

Mobile phones are thus now likely to get more expensive.

Discouraging smoking and vaping

The budget also proposed a number of measures that seem likely to discourage smoking and vaping with higher related costs for cigarettes and e-cigarettes.

It said that the reduced tax rate on the supply of cigarettes by distributors be enhanced to 2.5pc from 1pc.

It also proposed the imposition of a federal excise duty (FED) of Rs44,000 on acetate tow — a material commonly used to make cigarette filters.

Other similar curbs include:

  • FED on nicotine pouches at Rs1200 per kilogramme
  • Enhancement of FED on e-liquids — liquid used in e-cigerettes
  • FED on filter rods — cigarette body casings — to be enhanced from Rs1500/kg to Rs80,000/kg
  • Power to seal business premises of retailers selling illicit cigarettes
  • Price threshold for local manufactured cigarettes increased from Rs9,000 to Rs12,500

Health insurance for media personnel

The finance minister also announced a health insurance scheme for journalists and people associated with the media industry.

Hailing the move as a “historic step”, Information Minister Attaullah Tarar said health insurance would be provided to 5,000 people in the first phase.

He added that another 10,000 individuals would be provided health insurance in the second phase.

Other notable exemptions

Among other notable exemptions in duties or relief, the budget proposed:

  • Exemption of customs duties on raw materials of fluids and powders for use in hemodialysers (hemodialysis machines)
  • Exemption of customs duties on bovine lipid extract surfactant, a material indicated for rescue treatment of Neonatal Respiratory Distress Syndrome
  • Withdrawal of regulatory duty (RD) on import of sliver cans and lollipop sticks
  • Incentives for manufacturing of solar panels and allied equipment
  • Extension in scope of exemptions on import of machinery and equipment for farming and processing of seafood

Notable levies

Conversely, there were some moves which are likely to hurt the common man’s pocket:

  • 10pc sales tax on imported personal computers, laptop computers and notebooks
  • 10pc sales tax on many stationery items
  • 10pc sales tax on local supply of vermicelli, sheermal, bun and rusk excluding those sold in bakeries, and sweet shops falling in the category of Tier-1 retailers
  • 10pc sales tax on local supply of poultry and cattle feed
  • 10pc sales tax on newsprint and books
  • Withdrawal of exemption of RD on import of ground nuts and margarine imported by food confectionary
  • Withdrawal of concession of customs duties on import of fresh and dry fruits
  • Withdrawal of concessions of duties on import of hybrid vehicles
  • Reduction in the concession of customs duties on import of electric vehicles having a value above $50,000
  • Increase of customs duty on import of containers for aerosol products (hair sprays, insect sprays.etc)
  • Enhancement in rate of sales tax from 15pc to 18pc on supplies made by point of sale retailers dealing in “expensive and branded” leather and textile products
  • FED of Rs15/kg on supply of sugar to manufacturers
  • FED on cement enhanced from Rs2/kg to Rs3/kg
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