Islamabad, May 17, 2025 – In a significant move aimed at easing the financial burden on Pakistan’s banking sector, the National Assembly has ratified the Income Tax (Amendment) Bill, 2024, which offers substantial tax relief for banks.
The bill was passed during Friday’s session, marking a notable legislative victory for the government as it also cleared eight other bills with minimal resistance.
The Income Tax (Amendment) Bill, 2024 specifically targets the challenges banks face due to fluctuating tax rates on income generated from federal government securities, particularly those calculated based on the Advance-to-Deposit Ratio (ADR). According to the new tax structure, banks will now be taxed at a rate of 44% for the tax year 2025, 43% for 2026, and 42% for 2027 onwards. This phased reduction aims to provide greater predictability and stability for banks, enabling them to better manage their investment portfolios and long-term planning.
This development comes after the initial failure to pass the bill on Thursday, when the opposition temporarily blocked the motion brought forward by Finance Minister Muhammad Aurangzeb. However, the government quickly regrouped and ensured a strong presence in the National Assembly on Friday, successfully pushing through the legislation without further opposition.
In addition to tax relief for banks, the new law sets a flat 20% tax rate for small companies and a 29% rate for other corporate entities starting from 2025. The structured tax reforms are designed to create a more balanced and growth-oriented fiscal environment.
Alongside the tax bill, the National Assembly also passed several other key pieces of legislation. These include the Pakistan Citizenship (Amendment) Bill, 2024, which will allow members of the Pakistani diaspora to resume their citizenship, and the Islamabad Capital Territory Child Marriage Restraint Bill, 2025, a vital step toward eliminating child marriage in the federal capital.
Further amendments passed include changes to the Extradition Bill, streamlining the process for handling extradition requests, and the Civil Servants (Amendment) Bill, which mandates public asset disclosures for senior civil servants. These bills reflect broader governance reforms aligned with transparency and efficiency.
The National Assembly’s swift approval of these laws, particularly the tax relief for banks, indicates a clear policy direction focused on enhancing investor confidence, stabilizing the financial sector, and encouraging compliance. The banking industry, often constrained by heavy taxation, is expected to benefit from this reform, which could lead to increased investment in government securities and more robust financial intermediation.
As banks prepare to align with the new tax framework, analysts expect that this legislative step will not only boost profitability within the sector but also improve liquidity and capital adequacy, contributing positively to Pakistan’s broader economic outlook.