Pakistan’s Finance Minister Muhammad Aurangzeb on Friday presented federal budget with a total outlay of Rs18,771 billion.
Here’s what you need to know about the crucial budget with major relief for different sectors.
Major housing push: 150,000 eco-friendly units planned
Federal Finance Minister Muhammad Aurangzeb announced that Rs 54.6 billion has been allocated for sustainable urban development and the housing sector in the federal budget.
The finance minister said that 150,000 affordable and eco-friendly housing units will be constructed under this initiative, aimed at promoting sustainable urban growth and improving access to low-cost housing across the country. He also said that Rs 6.6 billion has been allocated for industry and trade.
The Finance Minister added that Rs 10 billion has been allocated for Karachi’s water supply project over four years, and in the textile sector, the second phase of 1,000 industrial stitching units under SMEDA will be expanded.
According to the document, the estimated expenditure on the civil government is Rs 1,071 billion, while Rs 430 billion has been allocated for emergency-related spending. Total current expenditure is estimated at Rs 17,495 billion.
5% withholding tax on social media influencers
The federal government stated that a 5% withholding tax (WHT) on social media influencers. Those who earn through social media platforms will have to pay a five per cent WHT on their income.
The tax has been applied to the social media influencers earning from YouTube, Facebook, Instagram and TikTok. The withholding tax will be automatically deducted every month from the influencers’ bank accounts.
IT and freelancers tax relief till 2029
The government proposed continuing tax relief for freelancers and IT exporters in the new budget, a move expected to further strengthen Pakistan’s digital economy.
Finance Minister Muhammad Aurangzeb said the digital economy has emerged as the country’s fastest-growing export sector.
He described IT and IT-enabled services, freelancers, software houses, and digital exporters as a valuable national asset.
He said the 0.25% Final Tax Regime (FTR) concession on IT export earnings was set to expire on 30 June 2026. However, in the budget, the government has proposed extending the scheme for another three years, until 30 June 2029.
Higher education gets Rs 46bn boost under Federal Development Programme
Finance Minister Muhammad Aurangzeb announced that under the Federal Development Program 2026–27, Rs 46 billion has been allocated for the higher education sector.
Of this amount, Rs. 34.9 billion has been earmarked for universities, he added. Additionally, Rs 3.6 billion has been allocated for the upgradation of the Pakistan Education and Research Network (PERN) and for the promotion of artificial intelligence (AI) and digital learning.
Govt allocates approximately Rs 22bn for Danish Schools Network
The federal government allocated approximately Rs 22 billion for the Danish Schools Network in the upcoming fiscal year 2026–27.
Addressing the budget session, Federal Finance Minister Muhammad Aurangzeb said that around Rs. 22 billion has been allocated for the Danish Schools Network in the current budget.
He further stated that under the Prime Minister’s Youth Skills Development Programme, Rs. 7.9 billion has been allocated for NewTech. In addition, Rs. 13 billion has been allocated for civil services, justice, police, and digital governance reforms.
Moreover, a development budget of Rs. 45 billion has been allocated for Azad Jammu and Kashmir, Rs. 44 billion for Gilgit-Baltistan, and Rs. 56 billion for the merged districts of Khyber Pakhtunkhwa.
The Finance Minister also announced a special package, under which Azad Jammu and Kashmir will receive an additional Rs. 5 billion, while Gilgit-Baltistan will receive an additional Rs. 4 billion.
Govt proposes abolishing Capital Value Tax on foreign assets
The government has decided to abolish the Capital Value Tax (CVT) imposed on foreign assets in the Finance Bill.
According to budget documents, the tax on foreign assets had not been effective in achieving its core objectives and was discouraging individuals from declaring assets held abroad.
The government maintains that disclosed foreign assets are already part of the documented financial record and are taxed accordingly. Therefore, the continuation of CVT was seen as an obstacle to the voluntary declaration of assets.
Fixed tax system for small shopkeepers.
Finance Minister Muhammad Aurangzeb has said that a proposal is under consideration to introduce a fixed tax system for small shopkeepers.
During his budget speech, he stated that under the proposed system, shopkeepers with annual sales of less than Rs 200 million would be eligible to participate.
They will pay a tax of 1% on their annual sales. Shopkeepers will be able to adjust their withholding tax against this fixed tax.
They will be required to deposit at least Rs 25,000 when submitting their returns. They will not be subject to routine audits, will not be responsible for withholding tax on purchases, and will be exempt from using a POS machine.
Tax on international transactions through debit, credit cards
The government reduced the tax on international transactions made through debit and credit cards from 5% to 0.5%.
The government has also abolished the capital value tax on foreign assets. The finance minister said that this step will encourage Pakistanis to bring their foreign financial assets into the formal record.
According to the finance minister, the measure will support efforts to strengthen the formal financial system and discourage undocumented transactions.
Major relief for cancer patients
Finance Minister Muhammad Aurangzeb unveiled a significant relief measure for cancer patients in the federal budget, proposing the complete removal of customs duty on raw materials used in the local manufacturing of cancer medicines.
The finance minister stated that the government remains committed to improving access to quality healthcare and making essential medicines more affordable for the public.
The proposed exemption is expected to reduce production costs for locally manufactured cancer drugs, potentially lowering prices and easing financial pressure on patients across the country.
Under the National Tariff Policy 2025-30, customs duty on more than 100 types of raw materials used in the manufacturing of cancer and other life-saving medicines will be abolished.
Aurangzeb said cancer places a heavy financial and emotional burden on patients and their families, making it essential for the government to take practical steps to reduce treatment costs.
Tax on sanitary pads, women’s health products abolished
The finance minister revealed that the government announced the complete removal of taxes on key women’s health and hygiene products.
As part of measures that are focused on improving women’s healthcare, taxes on sanitary pads and related essential items have been abolished.
The move is intended to make basic hygiene products more affordable and improve women’s access to essential healthcare and sanitation facilities.
Major cut in withholding tax on property transfers
Finance Minister Muhammad Aurangzeb, during the budget speech, announced that the budget proposes to reduce the withholding tax on property transfers.
It suggests lowering the withholding tax on property purchases for filers from 2.5% to 1.25%, while for non-filers, the withholding tax on property sales is proposed to be reduced from 5.5% to 2.75%.
Imported luxury EVs to be taxed under Federal Excise DutyThe
Minister announced that FED will be imposed on imported vehicles above 2000 CC and 3000 CC.
The government also decided to continue tax incentives for electric motorcycles, rickshaws, cars, and buses in the upcoming fiscal year.
Muhammad Aurangzeb said the government will continue to support electric vehicles to reduce fuel imports and control environmental pollution.
He further proposed a one per cent sales tax on imported electric trucks to promote electric technology in the transport and logistics sector.
However, he said that FED will be imposed on very expensive imported luxury electric vehicles costing above Rs. 20 million.
Higher levies on conventional vehicles in new budget
The new budget proposes significant tax incentives for environmentally friendly electric vehicles (EVs) while introducing a carbon levy on conventional fuel-powered vehicles.
As a result, larger vehicles are expected to become more expensive, while locally manufactured electric vehicles could become more affordable. However, existing tax rates on hybrid vehicles are likely to remain unchanged.
According to the budget document, the government has proposed reducing the customs duty on motors, batteries, and other components used in the local production of electric vehicles to just 1%.
It has also recommended maintaining sales tax at one per cent, while proposing a complete exemption from federal excise duty, capital value tax, and withholding tax. The implementation of these measures is subject to approval by the International Monetary Fund (IMF).
Govt proposes abolishing Capital Value Tax on foreign assets
The government has proposed abolishing the Capital Value Tax (CVT) imposed on foreign assets in the Finance Bill.
According to budget documents, the tax on foreign assets had not been effective in achieving its core objectives and was discouraging individuals from declaring assets held abroad.
The government maintains that disclosed foreign assets are already part of the documented financial record and are taxed accordingly. Therefore, the continuation of CVT was seen as an obstacle to the voluntary declaration of assets.
Also read: CM Maryam Nawaz praises federal budget, calls it relief-oriented
