Major Income Tax Changes for Tax Year 2025 – Finance Act 2024 Highlights
The Government of Pakistan, through the Finance Act 2024, has introduced several significant changes to the Income Tax Ordinance, 2001. These changes are applicable for the income tax returns due on 30th September 2025. Below is a comprehensive overview of the key tax amendments for individuals, associations of persons (AOPs), builders, developers, and exporters.
1. 10% Surcharge on High-Income Individuals and AOPs – Section 4AB
A new surcharge has been imposed under Section 4AB. If an individual or an AOP has a taxable income exceeding Rs. 10 million, a 10% surcharge will be added on top of the income tax computed under Division I of Part I of the First Schedule.
2. New Fixed Tax Regime for Builders & Developers – Section 7F
The Finance Act 2024 introduces a new taxation regime under Section 7F for builders and developers. This applies only to income from gross receipts arising from construction and sale activities, and not to income from other sources.
| Activity | Tax Rate |
|---|---|
| Construction & sale of buildings | 10% of gross receipts |
| Development & sale of plots | 15% of gross receipts |
| Both construction and development | 12% of gross receipts |
🔹 Important Note: Taxpayers under Section 7F can only claim credit to the extent of taxable profit declared under this section. Any excess income explanation will be disallowed.
3. Revised Tax Treatment for AOP Members – Section 92(1)
Under previous law, if AOPs paid due tax, the member’s share was exempt. However, now a key exception applies:
- If the turnover of the AOP is Rs. 300 million or more, and
- The return is filed without audited financial statements by a Chartered Accountant or Cost & Management Accountant,
→ Then the member’s share will no longer be tax-exempt and will be taxed again in the hands of the individual member.
🔍 Action Required: AOPs crossing the Rs. 300 million threshold must get their accounts audited before filing their 2025 tax returns.
4. Change in Tax Treatment of Exporters – Section 154(1)(4)
Export proceeds, which were previously treated as final tax, will now be considered minimum tax.
➡ Exporters must now calculate their tax liability based on:
- Normal tax rates,
- Minimum tax,
- Or Alternative Corporate Tax (if applicable).
Additionally, the 1% advance tax under Section 147(6C) is now adjustable for exporters, and tax deducted under Section 154 will also be treated as minimum tax.
5. Revised Tax Rates for Individuals and AOPs (Non-Salaried)
Here are the revised tax slabs for non-salaried individuals and AOPs:
| Taxable Income (PKR) | Tax Rate |
|---|---|
| Up to 600,000 | 0% |
| 600,001 – 1,200,000 | 15% of the amount exceeding Rs. 600,000 |
| 1,200,001 – 1,600,000 | Rs. 90,000 + 20% of amount exceeding Rs. 1,200,000 |
| 1,600,001 – 3,200,000 | Rs. 170,000 + 30% of amount exceeding Rs. 1,600,000 |
| 3,200,001 – 5,600,000 | Rs. 650,000 + 40% of amount exceeding Rs. 3,200,000 |
| Above 5,600,000 | Rs. 1,610,000 + 45% of amount exceeding Rs. 5,600,000 |
⚠️ Special Condition: For professional AOPs (like legal or audit firms) that cannot incorporate, the maximum rate is capped at 40%, not 45%.
Final Thoughts
These changes reflect the government’s efforts to broaden the tax base, enhance transparency, and bring builders, developers, and exporters under a more regulated tax structure.
✅ Taxpayers are strongly advised to understand how these provisions affect their specific situation and ensure compliance before the due date of September 30, 2025.
If you need assistance in tax filing, audits, or understanding your obligations under these new provisions, feel free to contact our tax experts for professional help.