Senate panel proposes tax exemption for annual income up to Rs1.2m

ISLAMABAD:

Senate’s Standing Committee on Finance has recommended exempting income tax for individuals earning up to Rs1.2 million per year. In addition, it approved a proposal to increase the limit for property purchases by non-filers from 130 per cent to 500 per cent of their declared assets.

The committee met under the chairmanship of Senator Saleem Mandviwala on Wednesday and conducted a section-wise review of the Finance Bill 2025.

During the meeting, FBR officials informed the committee that a new section has been introduced in the Finance Bill to bring e-commerce businesses and recreational clubs into the tax net.

FBR officials stated that under the new budget, a tax will be levied on the income of online academies and teachers, some of whom are earning up to Rs30 million annually.

FBR Chairman Rashid Langrial informed the committee that individuals with an annual income of Rs1.2 million would be liable to pay Rs12,500 in annual taxes. He also said the surcharge on income above Rs10 million has been reduced from 10 to 9 per cent.

Langrial further stated that recreational clubs, including the Islamabad Club, would be taxed under the proposed bill. This proposal was opposed by Committee Chairman Mandviwala, who argued against taxing clubs.

However, the FBR chairman contended that these clubs are exclusive to a privileged few and do not serve the general public.

FBR officials also proposed restrictions on non-filers, including limits on property and vehicle purchases. Initially, a 130 per cent limit on property purchases was proposed, but Senator Mohsin Aziz suggested increasing it, arguing that a non-filer with Rs10 million in declared assets should be allowed to buy property worth Rs50 million.

After deliberation, the committee approved raising the property purchase limit for non-filers from 130 per cent to 500 per cent.

Senator Shibli Faraz maintained that no tax should be imposed on salaries up to Rs1.2 million, arguing that a Rs100,000 monthly income equates to just Rs42,000 in today’s economic conditions.

The committee rejected the imposition of tax on individuals earning up to Rs1.2 million annually and on small online businesses.

Minister of State for Finance Bilal Azhar Kiyani said taxes would apply when income exceeds expenses and emphasised that this measure targets the privileged class.

Finance Minister Muhammad Aurangzeb added that penalties for non-filers were increased last year and that efforts are ongoing to bring non-filers into the tax net.

A new section, 17C, has been added to the Finance Bill 2025, under which online marketplaces engaged in e-commerce will be taxed. Individuals providing services through the internet and electronic networks—such as music, audio and video streaming platforms, cloud services, online software, telemedicine, and e-learning—will also be subject to taxation.

Additionally, online banking, architectural design, research and consultancy, digital accounting, and other digital services will be taxed. However, the committee rejected a proposal to tax small online businesses.