FBR Proposes Key Tax Reforms for Upcoming Federal Budget 2025

Islamabad:The **Federal Board of Revenue (FBR)** has presented its tax proposals for the **next fiscal year’s federal budget**, which includes significant changes aimed at easing the tax burden on certain income groups and introducing new levies on high-income earners and luxury goods.

### **Key Proposals and Changes:**

1. **Abolition of Property Tax on Transactions:**
The FBR has proposed the **removal of the Federal Excise Duty (FED)** on the sale of properties. Currently, under the ongoing fiscal year, the government had imposed a **3% FED** on transactions made by **tax filers** and a **5% FED** on transactions by **non-filers**. This tax, introduced from **June 30, 2024**, had a major impact on the **real estate market**, leading to a significant slowdown in property transactions.

– Sources indicate that the decision to remove this tax comes after discussions between the **Prime Minister’s Task Force** and the **IMF delegation**. The FED on property sales had added a substantial financial burden on the sector, which the government now aims to alleviate.

2. **Tax Relief for Low-Income Groups:**
The proposal includes providing **tax exemptions** for individuals earning **up to 6 lakh rupees annually**. In the current fiscal year, this income group was taxed for the first time, but the new budget suggests offering them some **tax relief**. The **IMF’s approval** is a prerequisite for this change, and there may also be modest tax relief for individuals earning **up to 12 lakh rupees annually**.

– However, there are no proposals for tax relief for higher-income groups at this stage.

3. **Tax on Pensions:**
The FBR is considering the introduction of a **tax on higher pensions**, specifically targeting individuals receiving **significant monthly pension amounts**. This move aligns with the government’s policy of generating additional tax revenue from higher-income groups.

4. **Increased Taxes on Petrol-Operated Vehicles:**
With the government focusing on revenue generation, the budget proposal includes an increase in **taxes and duties on petrol-powered vehicles**. This move is likely to have an impact on car buyers in the conventional vehicle market.

5. **Incentives for Electric Vehicles:**
On a more positive note for the electric vehicle (EV) market, the **FBR** is proposing a **further reduction in taxes** on **electric vehicles**. This comes as part of the government’s broader push towards encouraging the adoption of environmentally friendly and energy-efficient transportation solutions.

6. **Carbon Levy on Petrol:**
Another key proposal under consideration is the imposition of a **carbon levy** of **5 rupees per liter** on **petrol**. This levy is intended to encourage cleaner energy consumption while raising additional funds for the government.

### **Impact and Outlook:**
The proposals suggest a balancing act between generating additional revenue from higher earners and vehicles while also providing relief to low-income groups and incentivizing the transition to electric vehicles. The **real estate market**, however, is expected to receive a significant boost from the removal of the property transaction tax, potentially leading to an increase in property sales.

As these proposals are still under discussion and subject to **IMF approval**, it remains to be seen how many of these suggestions will be finalized in the **2025-26 fiscal budget**. Nonetheless, these reforms reflect the government’s ongoing efforts to **streamline the tax system** and **boost economic growth** while addressing the fiscal challenges the country faces.