Motorists in Islamabad could soon face higher vehicle ownership costs as the government proposes significant changes to the Token Tax structure under Budget 2026-27.
The proposed budget introduces revised vehicle taxation rates based on engine capacity and vehicle invoice value. If approved, the new measures could increase annual expenses for thousands of vehicle owners across the federal capital.
According to the proposal, cars with engine capacities up to 1000cc will be subject to a fixed Token Tax of Rs20,000. The move is expected to place an additional financial burden on owners of small vehicles, who have already been affected by rising fuel prices and increasing transportation costs.
For vehicles with engine capacities between 1001cc and 1300cc, 1301cc and 1500cc, and 1501cc and 2000cc, the government plans to charge a tax equal to 0.25 percent of the vehicle’s invoice value. This means the amount payable will depend on the original value of the vehicle.
Luxury vehicle owners may face even higher charges. Under the proposed framework, cars with engine capacities from 2001cc to 2500cc and those above 2500cc will be taxed at 0.35 percent of their invoice value. This category is expected to see the largest increase in vehicle-related taxes.
The revised Token Tax structure is not limited to private vehicles. The budget proposal also includes new rates for motor cabs operating in Islamabad.
According to the proposed rates, motor cabs with engines up to 1000cc will pay Rs600 annually. Cabs with engine capacities above 1000cc but not exceeding 1300cc will be charged Rs1,000. Vehicles in the 1300cc to 1500cc category will pay Rs1,700, while cabs with engines above 2500cc will face a tax of Rs4,200.
Authorities have also extended the updated taxation framework to commercial and public transport vehicles. The move suggests a broader effort to overhaul vehicle taxation and generate additional revenue under the new fiscal plan.
The proposal comes at a time when motorists are already dealing with increased travel expenses due to fuel price fluctuations. Industry observers believe the changes could further raise the overall cost of vehicle ownership and operation.
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If approved by parliament, the revised Token Tax rates will become part of the government’s fiscal measures for the upcoming financial year. Vehicle owners across Islamabad will be closely monitoring the budget process as the proposal moves forward.
