The upcoming federal budget for fiscal year 2025-26 is set to introduce significant tax increases, particularly targeting bank deposits, savings schemes, and cash withdrawals by non-filers. One key proposal includes doubling the withholding tax on cash withdrawals from 0.6 percent to 1.2 percent, alongside a new tax slab for daily withdrawals exceeding Rs50,000 aimed at curbing large cash transactions.
In addition to these changes, the government is considering raising the General Sales Tax (GST) on locally manufactured vehicles with engine capacities under 800cc, increasing the rate from 12.5 percent to 18 percent. Other tax adjustments on petrol and diesel vehicles, capital gains, profits, and the super tax are also under review, with a potential reduction in super tax rates to encourage investment in large-scale industries.
Also Read: Govt Considers 1.2% Cash Withdrawal Tax on Non-Filers in Budget 2025
Despite these tax hikes, development spending is poised for a major increase. The federal government plans to allocate over Rs1,000 billion for development projects, supported by Rs270 billion in foreign borrowing. Provincial governments are also ramping up their development budgets, with Punjab leading at Rs1,190 billion, followed by Sindh, Khyber Pakhtunkhwa, and Balochistan. Collectively, provinces expect to borrow Rs802 billion from foreign lenders.
The budget aims to balance revenue generation with economic growth, setting a GDP growth target of 4.2 percent for FY2025, up from 2.68 percent this year. Inflation is targeted to fall to 7.5 percent from the current double-digit levels. Final budget details are expected to be announced later this month.
