In a major reversal, the government has eased restrictions on non-filers, allowing them to make high-value purchases under revised conditions. Originally, the Finance Bill 2025 proposed strict bans preventing anyone with undeclared income from buying homes, cars, or making large investments. But after facing political and public pressure, the government has now scaled back the measure to apply only to luxury- level transactions.

What’s Changed?

Finance Minister Muhammad Aurangzeb, while announcing Rs. 36 billion in additional taxes, confirmed that the proposed enforcement will only apply to:

• Cars above 1,600cc

• Residential plots larger than 1 kanal in metropolitan areas or 2 kanals elsewhere

• Annual cash deposits over Rs.100 million
• Stock market investments over Rs. 50 million

This update means that most everyday property and car buyers are no longer affected, significantly weakening the Federal Board of Revenue’s (FBR) earlier attempt to curb tax evasion through enforcement.

New Tax Measures

To offset revenue shortfalls and fulfill IMF commitments, the government has introduced three new tax measures, expected to raise Rs. 36 billion:

• Tax on debt mutual funds for companies raised from 25 percent to 29 percent

• Corporate income from government securities now taxed at 20 percent, up from 15 percent

• Federal Excise Duty introduced on day-old chicks, with Rs. 10 charged per chick to raise Rs. 15 billion annually

Relief for Property Sellers and Pensioners

In a move welcomed by salaried individuals and retirees, the budget includes several relief measures:

• No withholding tax on the sale of residential property held for over 15 years

• Retirement benefits such as gratuity and pension commutation remain tax-free

• Annual pensions exceeding Rs. 10 million will be taxed at 5 percent

• Pensioners aged 75 or above are fully exempt from this tax

• Income tax for those earning between Rs. 600,000 and 1.2 million annually is reduced from 2.5 percent to 1 percent

Affordable Housing Scheme

The government also announced the launch of a 20-year low-income housing loan scheme to support home ownership for low- and middle-income groups. Further details are expected in the coming weeks.

Stricter Rules for Tax Fraud Arrests

In response to concerns about overreach, the following guidelines will now govern arrests related to tax fraud:

• No arrests for fraud involving less than Rs. 50 million without a court warrant

• Arrests permitted only after three ignored notices, evidence of tampering, or flight risk

• Arrests must be approved by a three-member FBR committee and the individual must be presented before a special judge within 24 hours

Policy Outlook

The softened enforcement on non-filers shows the government’s attempt to strike a balance between boosting tax collection and avoiding backlash from influential sectors. While the rollback dilutes the FBR’s enforcement capacity, it also reflects the practical limitations in executing sweeping reforms without adequate systems and staffing.

Whether these measures will help meet revenue targets or simply shift the burden onto already compliant taxpayers remains to be seen.