The Federal Board of Revenue (FBR) made big modifications to Pakistan’s tax system with the Finance Act 2025. These improvements are meant to make the system more up-to-date, increase revenue collection, and encourage people to pay their taxes online. These big changes, which will start on July 1, 2025, will affect a lot of different types of taxpayers, including people who work for a salary, small and medium-sized businesses, merchants, and people who do business online
No cash transactions over Rs. 200,000 💵
The FBR has made it clear that firms won’t have to pay taxes on cash payments, despite rumours of a new tax. Instead: Section 21(s) of the Income Tax Ordinance now says that 50% of business costs related to any single invoice with non-digital cash receipts over Rs. 200,000 will not be allowed.
Wikipedia +15 TechJuice +15 LinkedIn +15. 📎 Sample: Cash bill of Rs. 199,999? ✅ Completely deductible. Invoice for cash of Rs. 200,001? ⚠️ Up to half of the related costs may not be approved. Goal: To get people to use digital transactions more and keep better records.
- E-Invoicing and Digital Integration Are Required 🧾
The Digital Invoicing System now does the following to encourage more openness and digital compliance: This applies to all taxpayers, not just businesses, and goes beyond the FMCG sector.
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The Federal Board of Revenue By May–June 2025, FBR’s solution must work with both POS and ERP systems. Launch met with opposition, with trade groups including PCDMA saying that not enough engagement and training for stakeholders caused uncertainty.
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LinkedIn +14. - A simpler tax return format for 2025
FBR showed off a new 25-page electronic return draft for the tax year 2025. People have criticised its length, even if it is called “simplified.” It was released under SROs Assignment 1212(I)/2025 and 121 Rod 1213(I)/2025. Federal Board of Revenue opened for 7 days of public comment to improve formats and guidelines.
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Wikipedia +3. The goal is to get more people to use digital filing, but professionals aren’t sure how easy it really is. - A wider tax base and progressive reforms. The Finance Act 2025 additionally added things like: Less of a fee (9%) and a small break for salaries up to Rs. 3.2 million
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Digital Pakistan 4% minimum rent income on commercial property, and you can’t use rental revenues to cover business losses.
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Wikipedia +3. New taxes on internet commerce: 5% on international platforms and 0.25% to 2% on payments made in the US
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Wikipedia +2. Encouraging richer groups, including raising the mutual fund dividend tax from 25% to 29% over time and putting a 5% tax on chicken hatchlings every day, to raise Rs. 36 billion in Gulberg Islamabad. - Stronger tools for enforcement
FBR got more power to: Seal property, suspend taxpayer funds, and punish anyone who send fake invoices
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Taxation PK News +8 Use AI and real-time data access to find under-reporting in its digital surveillance and compliance network. - Limits on auto-commerce and measures that are specific to certain sectors
People who are “ineligible” under Income Tax legislation can’t book or register a car under Section 114C. Starting July 1, 2025, they will need to show proof of eligibility before booking. PAMA was worried about the rules for implementation and eligibility. - Approval of the Budget and Revenue Performance
In April 2025, FBR said that tax collection grew by 30% from the previous month, topping earlier goals for Income Tax (+44%), Sales Tax (+17%), and FED (+31%).
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ProPakistani +7. Parliament enacted the Finance Act on June 26, 2025, and the president signed it into law on June 29. What this means for stakeholders
Impact and strategy for stakeholders
People with jobs and pensions A little bit of help for people with lower-middle incomes, but more scrutiny on rental and digital income.
Businesses with a lot of cash To avoid having to pay for things that aren’t allowed, you need to switch to digital payments.
Small and Medium-Sized Businesses and Traders Must include e-invoicing/POS or risk breaking the law.
Digital Commerce Platforms Expect new withholding requirements; international platforms will have to pay a 5% tax.
Car Buyers Booking eligibility now depends on paying taxes, which could make transactions take longer.
People who work with taxes Act quickly during the 7-day feedback period for returns.
✅ The Bottom Line
The Finance Act 2025 represents a turning moment. The FBR is pushing for more digitalisation and a bigger revenue base through compliance-driven methods, not only higher rates. Tools like disallowance rules and e-invoicing will have some problems at first, but they show that Pakistan is heading towards a tax system that is open and uses technology. It’s time for businesses and people to change. They need to go digital, keep records, and change how they do their taxes. What’s the good thing? You stay in compliance, avoid fines, and help Pakistan’s long-term goal of modernising its finances.
