The International Monetary Fund (IMF) has reportedly rejected the Federal Board of Revenue’s (FBR) proposal to grant a 25% tax rebate to teachers and researchers in the upcoming budget 2025-26. This development was reported by The News on Sunday.
In the Finance Bill 2025-26, the FBR had put forward a proposal for a 12-month holding period to avail the concessionary tax regime on investments made in Special Convertible Rupee Accounts (SCRA).
The National Assembly Standing Committee on Finance, chaired by Syed Naveed Qamar, convened at the Parliament House on Saturday to review the Finance Bill. During the review, the chairman argued that the proposed “holding period” condition would deter investment in SCRAs.
The chairman suggested that the government should set a shorter holding period, specifically around 3-6 months, for investments in SCRAs. The FBR Chairman endorsed this viewpoint, stating that the FBR could propose a six-month holding period.
The FBR has already discussed this proposal with the State Bank of Pakistan (SBP). In the event a three-month holding period is considered, it would require the approval of the federal cabinet.
Muhammad Ali Malik, Executive Director of the SBP, informed the NA panel via an online briefing that the proposed amendment was unrelated to the Roshan Digital Account (RDA) and specifically pertained to SCRAs. He emphasized the need for some limitation on the holding period for SCRA investments to discourage short-term capital inflows.
Malik further elaborated that if investments are held for a period exceeding one year, the concessional tax regime should be applicable. To mitigate market volatility, he suggested a one-year holding period for investments in these accounts.
According to the SBP’s assessment, introducing a one-year holding period would not have an immediate or significant impact on investment. However, the NA panel ultimately proposed a holding period of a few months for availing the concessionary tax regime on SCRA investments.
Regarding the tax rebate for teachers and researchers, FBR Chairman Rashid Mahmood Langrial informed the National Assembly Standing Committee on Finance that the IMF had rejected the FBR’s proposal to allow a 25% tax rebate from July 1, 2025.
He stated that the FBR had approached the Fund twice, but they did not agree to the proposal. The IMF’s rationale was its desire for tax harmonization, thus disallowing tax rebates for specific professions like teachers and researchers.
However, Langrial mentioned that the government could potentially provide a subsidy from its budgetary resources if feasible. The Minister of State for Finance, however, expressed regret, noting the absence of fiscal space in the 2025-26 budget.
The NA committee also recommended increasing the withholding tax on cash withdrawals from banks by non-filers from 0.6% to 0.8%. However, the committee rejected the proposal by the Senate Standing Committee on Finance to raise this tax rate from 0.6% to 1%.
Concerning the taxation of salaried individuals, the FBR chairman informed that a mere 1% tax would be applicable on salaried individuals whose taxable income exceeds Rs600,000 but does not exceed Rs1,200,000.
