To compensate for potential revenue losses from proposed tax relief for salaried individuals, the Federal Board of Revenue (FBR) is considering a 2% increase in tax rates on interest income from bank deposits and savings schemes in the 2025-26 budget. The hike would apply to both filers and non-filers, raising the existing rates from 15% to 17% for filers and 35% to 37% for non-filers.
The move comes after the IMF urged Pakistan to present concrete tax measures to cover a projected shortfall caused by reduced formal sector activity following last year’s aggressive taxation. While the IMF has not yet approved the proposal, officials argue that taxing passive income could help stabilize revenue. However, critics, including former FBR member Dr. Muhammad Iqbal, warn that higher taxes on interest income will hurt savers—especially retirees and low-income earners—who already face declining returns due to lower policy rates.
Meanwhile, the tobacco and beverage industries report shrinking sales due to high taxes, pushing consumers toward untaxed alternatives. The beverage sector has proposed reducing the Federal Excise Duty (FED) from 20% to 15%, while tobacco tax contributions are expected to drop by Rs45 billion this fiscal year.