ISLAMABAD: Pakistan’s federal government is preparing to crack down on tax non-filers by proposing strict limitations on their financial activities in the 2025–26 budget, while offering substantial tax relief to salaried workers.
Announcing the budget in the National Assembly, Finance Minister Muhammad Aurangzeb outlined a series of measures targeting individuals who fail to file income tax returns. Under the proposed rules, non-filers would be barred from purchasing vehicles, acquiring property, investing in mutual funds or securities, and even opening bank accounts.
“These restrictions are aimed at pushing more people into the tax net and curbing undocumented financial activity,” Aurangzeb said.
The budget also proposes raising the advance tax on cash withdrawals by non-filers from 0.6% to 1%, further tightening pressure on those operating outside the tax-ambit.
In a significant policy shift, Aurangzeb signaled that the government may eventually eliminate the filer/non-filer distinction altogether, moving toward a system where only tax-compliant individuals can access key financial services.
“These steps reflect our commitment to expanding the tax base and improving compliance,” he stated. “It should no longer be easy to stay outside the formal tax system.”
While non-filers face growing restrictions, salaried workers will see meaningful relief under the new budget. The government has proposed broad-based reductions in income tax rates to ease the financial burden on wage earners, who have long shouldered a disproportionate share of taxation.
The largest benefit will go to those earning up to Rs2.2 million annually, with the minimum tax rate dropping from 15% to 11%. Individuals earning between Rs600,000 and Rs1.2 million will see their tax rate cut from 5% to 2.5%.
Higher earners are also set to gain. Those with annual incomes between Rs2.2 million and Rs3.2 million will have their tax rate reduced from 25% to 23%.
Aurangzeb emphasized that these changes are designed not just to provide relief but to better align incomes with inflation, simplify the tax structure, and promote fairness.
“Supporting the salaried class has been a clear priority of Prime Minister Shehbaz Sharif,” he noted.
Together, the dual approach of easing the burden on compliant taxpayers while tightening the noose on non-filers signals a bold shift in Pakistan’s fiscal policy — one aimed at formalizing the economy and ensuring broader participation in the national tax system.
