Pakistan’s Federal Budget 2025–2026, unveiled on June 10, 2025, is a pivotal document that reveals the government’s fiscal strategy for the coming year. With a total outlay of approximately PKR 17.6 trillion, this Who Pays What in Pakistan’s Budget 2025–2026? Freelancers to Corporates
The federal budget for 2025–2026 aims to widen the tax net, ensure economic stability, and invest in key sectors like defense, infrastructure, and the digital economy. But what does this mean for everyday citizens—especially freelancers, salaried employees, small business owners, and large corporations?
Let’s break down who pays what under this ambitious fiscal plan, and what it means for various segments of society.
Budget at a Glance: Revenues, Expenditures & Deficit
Pakistan’s total budget outlay for 2025–2026 stands at PKR 17.6 trillion. Here’s how the numbers stack up:
- Tax Revenue Target: PKR 14.13 trillion (nearly 19% increase YoY). startup.pk
- Non-Tax Revenue: PKR 5.15 trillion
- Gross Federal Receipts: PKR 19.28 trillion
- Current Expenditure: PKR 16.3 trillion
- Public Sector Development Programme (PSDP): ~PKR 1 trillion
- Fiscal Deficit Target: 4.8% of GDP (down from 5.9%)
The high revenue target reflects IMF-driven reforms aimed at tightening fiscal discipline and boosting long-term stability.
Salaried Individuals & the Middle Class
Relief & Reforms
The middle-income group sees modest relief:
- Tax cuts for annual incomes up to PKR 3.2 million
- Slight reduction in surcharges on incomes above PKR 10 million
- Super-tax cuts for ultra-high earners
Incentives Restored
- Home loan tax credits reinstated for small borrowers
- 25% salary credit for full-time teachers and researchers (valid till mid-2025)
- Advance tax on property purchases lowered (rate details pending)
These changes aim to protect middle-class income while still supporting state revenues.
Freelancers: The Digital Dollar Earners
Pakistan’s 1.5 million freelancers contribute approximately USD 400–500 million annually in foreign exchange. The 2025–26 budget formally brings them into the tax system.
New Measures:
- 1% withholding tax on foreign remittances
- Reduced to 0.25% if registered with the Pakistan Software Export Board (PSEB)
- Plans to clearly define freelancers vs. remote employees
This step marks a shift from neglect to formal inclusion of this vital segment.
Digital Creators & Online Influencers
A separate taxation structure is proposed for digital content creators—those earning through:
- YouTube
- TikTok
- Freelancer platforms
- Other monetized digital content
Proposed Tax:
- 3.5% flat tax on digital income streams
- Estimated revenue: ~PKR 52 billion
This move recognizes content creation as a professional sector—and a taxable one.
Payments, E-Commerce & Non-Filers
E-Commerce and Digital Transactions
To regulate fast-growing online sales:
- Sales tax on digital transactions increased to 2% (from 1%)
- Applies to banks, payment gateways, and courier companies
- 18% GST on all online sales, including those via social media platforms
Non-Filers:
- 1.2% advance tax on cash withdrawals over PKR 50,000 from non-filers
These steps aim to formalize digital business while deterring tax evasion.
Small Businesses & E-Commerce Sellers
New Compliance Burdens
Small and micro-entrepreneurs now face tighter scrutiny:
- Mandatory registration and invoicing
- Required to file quarterly returns
- Full digitization of sales reporting
While this brings transparency, it may increase operational costs for smaller sellers.
Corporates & High-End Taxpayers
Major Tax Contributors
Large corporations continue to shoulder a significant burden:
- Income Tax Contribution: PKR 6.9 trillion
- Indirect Taxes (Sales, FED, Customs): PKR 7.2 trillion
Customs and Excise Measures
- Tariff restructuring: Slabs now at 5%, 10%, 15% (replacing 3%, 11%, 16%)
- Rationalized import duties across 1,573 categories
- AI-driven audits and customs surveillance
- Centralized assessment systems to curb smuggling and tax leakage
Big businesses face increased digital enforcement and reduced loopholes.
Public Development & Investment
PSDP Allocations
About PKR 1 trillion has been set aside for development initiatives:
- PKR 682 billion for federal ministries
- Remaining funds for provinces and special regions
- Key focus areas: Water, transport, health, education, and energy
Despite fiscal constraints, development spending remains a priority.
Defense, Debt, and Fiscal Management
Non-Development Expenditures
- Defense Budget: Increased by ~20% to PKR 2.55 trillion
- Debt Servicing: Stands at PKR 8.2 trillion
Governance Improvements
- Enhanced powers under Public Finance Management Act
- Real-time tracking and financial transparency for state-owned entities
Heavy non-development spending leaves little room for aggressive social programs or tax relief.
Balance Sheet: Pros & Cons
👍 Pros:
- Tax base expansion into informal and digital sectors
- AI-driven audits to improve compliance and transparency
- Relief for salaried classes through rebates and credits
👎 Cons:
- Compliance pressure on small freelancers and startups
- Limited support schemes like micro-loans or training programs
- High defense and debt payments crowd out growth initiatives
Who Pays What? — Summary Table
| Segment | New or Updated Measures |
|---|---|
| Freelancers | 1% tax on foreign remittances; 0.25% if PSEB-registered |
| Digital Creators | 3.5% proposed flat tax on YouTube, TikTok, and freelance income |
| E-Commerce Sellers | 18% GST; 2% withholding via banks and payment platforms |
| Non-Filers | 1.2% tax on cash withdrawals over PKR 50,000 |
| Salaried Class | Tax relief up to PKR 3.2 million income; education/home credits |
| Corporates & Importers | Customs rationalization; digital surveillance and audits |
Final Thoughts: A Shift Toward Formalization
The 2025–2026 budget marks a decisive turn towards taxing the digital economy. From YouTubers and TikTokers to e-commerce sellers and dollar-earning freelancers, no group is left untouched.
But effective implementation is key. Without clear guidelines, ease of compliance, and supportive programs, this push could risk stifling innovation and entrepreneurship.
To truly benefit from this formalization, Pakistan must invest in making compliance simpler, rewarding, and growth-oriented.
