Finance Bill 2025-26: Online Teachers, E-commerce, And Clubs In Trouble

The Federal Board of Revenue (FBR) has put forward several proposals in the Finance Bill 2025-26 aimed at expanding Pakistan’s tax base. These proposals, discussed during a recent session of the Senate Standing Committee on Finance and Revenue. It includes taxing online academies and teachers, e-commerce businesses operating through online marketplaces, and recreational clubs like the Islamabad Club.

Taxation of Online Education and E-commerce

The FBR plans to impose income tax on online academies and teachers, citing significant earnings from digital education services. A new clause, 17C, has been introduced in the Finance Bill 2025 for this purpose. This measure also extends to e-commerce businesses utilizing online marketplaces, as the FBR seeks to tap into the rapidly growing digital sector.

However, the Senate Standing Committee on Finance expressed reservations about taxing small individual online businesses and suggested that the FBR should focus on imposing tax on goods rather than services in the e-commerce sector.

Tax on Recreational Clubs

The FBR also proposed to collect income tax from recreational clubs, including the Islamabad Club, which were previously exempt. The State Minister for Finance and Revenue, Bilal Azhar Kayani, stated that these clubs should be taxed if their income exceeds their expenditures, as part of efforts to broaden the tax net. Despite this, the Senate Standing Committee on Finance opposed the imposition of tax on the income of the Islamabad Club.

Adjustments to Salaried Class Taxation

The FBR Chairman highlighted significant reductions in taxes for salaried class previously introduced in budget 2025-26. Specifically, the tax rate for those with an annual income between Rs 600,000 and Rs 1,200,000 has been reduced from 5 percent to 2.5 percent. Additionally, the surcharge on income exceeding Rs 10 million has been lowered from 10 percent to 9 percent.

In contrast, the Committee recommended that individuals with a monthly income of Rs 100,000 should be exempted from tax, further recommending a tax exemption on annual income of Rs 1.2 million.

The Federal Minister for Finance and Revenue also introduced a new mortgage facility for houses up to 2,000 square feet. Individuals availing this facility will be eligible for a tax credit not exceeding 30% of their total income.

Purchases from Non-Registered Suppliers

The Committee raised concerns about the FBR’s move to disallow 10% in cases of purchases made from non-registered suppliers. They argued that this would discourage competitive markets, given the limited number of registered suppliers nationwide.

Wealth Statement Restrictions

Concerns were also voiced regarding a newly inserted clause that restricts “Eligible Persons” from making purchases exceeding 130% of the wealth reflected in their previous year’s statement. The Committee recommended increasing this threshold to 400% of the previous year’s statement.

The ongoing discussions between the FBR and the Senate Standing Committee on Finance Bill 2025-26 highlight the government’s efforts to expand the tax net and streamline tax policies.