The National Assembly's Standing Committee on Finance and Revenue has approved a series of recommendations for the proposed Finance Bill 2026-27, including a 5% withholding income tax on earnings from social media platforms. The committee also recommended abolishing the 1% advance tax on exporters and introduced changes to the taxation of inherited properties.
Key Proposals Approved
Chaired by Syed Naveed Qamar, the committee resumed its meeting after a lunch break to examine the proposed finance bill for the upcoming fiscal year. Officials from the Federal Board of Revenue (FBR) briefed lawmakers on various tax reforms and proposed measures.
Tax on Social Media Income
One of the key proposals approved was the imposition of a 5% withholding income tax on earnings from social media platforms, particularly YouTube. FBR officials informed the committee that the tax would apply when YouTubers and other content creators repatriate their dollar earnings to Pakistan through banking channels. They noted that income generated through social media platforms had reached approximately Rs10 billion.
Relief for Exporters
The committee also approved a proposal to abolish the 1% advance tax imposed on exporters, a move seen as providing relief to the export sector.
Changes to Inherited Property Taxation
Lawmakers considered proposals related to capital gains tax on inherited properties and plots. FBR officials stated that the cost base of inherited property would be determined according to its market value on the date of the original owner's death. For example, if a plot was valued at Rs80 million at the time of the owner's death and later sold for Rs100 million, capital gains tax would apply only to the Rs20 million increase in value. However, Qamar proposed that the cost base should instead be calculated from the date ownership of the property is transferred to the heir. The committee approved this recommendation. It also endorsed a proposal to provide legal protection to inherited properties transferred through family settlement arrangements.
Mandatory Electronic Filing of Tax Returns
Separately, the committee approved a proposal making the electronic filing of income tax returns mandatory. FBR officials said all future income tax returns would have to be submitted through the Inland Revenue Information System, while companies would also be required to submit their financial statements in machine-readable format. Although most tax returns had been filed digitally since 2013, a limited number of manual returns were still being accepted in a few cities, including Gujranwala. Those manual submissions would now be discontinued.
Algorithmic Settlement Mechanism
The committee also approved proposals relating to an algorithmic settlement mechanism. According to FBR officials, taxpayers opting for the mechanism would be allowed to file revised tax returns without obtaining prior approval from the commissioner. They added that such taxpayers would not face any separate penalty or surcharge, a measure aimed at making the tax system simpler and more transparent.
