ISLAMABAD — Finance Minister Muhammad Aurangzeb presented Rs 18,771 billion federal budget on Friday with major tax concessions for real estate buyers and sellers, the end of super tax bracket for high earners, and extended relief for IT exporters, even as interest payments alone are projected to consume Rs 8,054 billion of total expenditure.
Relief for the Property Sector
Under new measures, the withholding tax on property purchases for filers has been reduced from 2.5% to 1.25%, while the tax on property sales for filers has been cut from 5.5% to 2.75%. The changes are expected to ease transaction costs in a real estate market that has been sluggish in recent years, with analysts watching closely for any uptick in activity.
In one of the budget’s more debated provisions, the government abolished the super tax applicable to incomes between Rs 15 crore and Rs 25 crore, removing a levy that had targeted higher-income earners since its introduction.
Exporters will see the advance income tax rate on export proceeds reduced from 2% to 1.2%. Separately, the government extended the Final Tax Regime (FTR) exemption on IT export income through June 2029, a move aimed at providing long-term policy certainty to the technology and services export sector.
Of the Rs 18,771 billion total outlay, current expenditure accounts for Rs 17,495 billion. The largest single component is interest payments at Rs 8,054 billionm, close to half the entire budget. Other major allocations include:
- Defence: Rs 3,000 billion
- Pensions: Rs 1,169 billion (Rs 822 billion military, Rs 272 billion civil)
- Civil government operations: Rs 1,071 billion
- Subsidies: Rs 1,091 billion
- Emergency/contingency funds: Rs 430 billion
Federal Development Budget, covering infrastructure and development projects, stands at Rs 1,050 billion, a fraction of total spending.
To finance the budget, the Federal Board of Revenue (FBR) has been set a collection target of Rs 15,264 billion, one of the highest on record. With several tax concessions reducing the burden on property transactions and high-income earners, economists say meeting this target will likely require intensified enforcement and broadening of the tax base elsewhere.
The budget reflects a balancing act between stimulating key sectors, real estate, exports, and IT, and managing a fiscal position where debt servicing remains the single largest expenditure item. Analysts will be watching whether the projected revenue gains materialize and whether the tax relief measures translate into broader economic activity in the coming fiscal year.
