Budget 2025-26: Taxes Rise on Vehicles, Cigarettes; Relief for Travelers, Solar Energy Sector

Pakistan’s federal budget for FY2026-27 introduces a mixed economic outlook, with significant increases in taxes on large vehicles and certain goods.

Owners of vehicles exceeding 2,000cc will face higher taxation, potentially increasing costs for consumers in the larger car segment. Additionally, duties on electronic cigarettes and related liquids have been increased.

Fertilizers and pesticides are also set to become more expensive due to new levies.

A notable addition is a 5% tax on income earned through social media platforms, marking the first time digital content creators will be included in Pakistan’s tax system.

Solar panel prices remain unaffected as the government maintains existing exemptions for the sector. Air travel costs are expected to decrease, with lower taxes applied to online ticket purchases.

Cosmetics and beauty products may see price reductions following budget measures. Property transactions are likely to increase due to relief measures, including a halved withholding tax on property transfers (from 2.5% to 1.25%) and the abolition of capital value tax on foreign assets.