IMF Blocks Teacher Tax Relief, Tightens Fraud Arrests

The International Monetary Fund has rejected Pakistan’s proposal to restore the 25% tax rebate for teachers and researchers starting July 2025, citing tax harmonisation concerns, FBR Chairman Rashid Langrial told the National Assembly’s finance committee. With no fiscal space in the 2025–26 budget, the government may consider alternatives like special allowances.

The committee also approved revised arrest procedures for tax fraud, allowing arrests only under strict conditions: risk of escape, evidence tampering, fraud over Rs50 million, or ignoring three notices. Arrests must be approved by three senior FBR members.

Langrial also noted the removal of the pension tax exemption clause—only pensions above Rs10 million will now be taxed. The committee recommended increasing the withholding tax on cash withdrawals by non-filers from 0.6% to 0.8%, rejecting a Senate suggestion to raise it to 1%.

Salaried individuals earning between Rs600,000 and Rs1.2 million annually will now face a 1% income tax under new provisions.