Tax rates for insurance agents and brokers reduced, while life insurance exemption threshold increased to Rs3.5 million.
KARACHI: The Sindh government on Wednesday announced the resolution of long-standing legal disputes with the insurance sector and unveiled significant tax relief measures aimed at promoting insurance services and improving compliance from the industry.
Presenting the Sindh Budget 2026-27, Chief Minister Syed Murad Ali Shah said that the insurance sector, particularly life insurance, health insurance, reinsurance companies and insurance brokers, had remained non-compliant with the levy of Sindh Sales Tax for several years.
He noted that insurance companies had challenged the tax levy through litigation in various courts, creating uncertainty for both the government and industry stakeholders.
To resolve the issue, the provincial government held extensive negotiations with representatives of the insurance industry and successfully developed a framework for settlement. According to the chief minister, the agreement is designed to benefit consumers, improve tax compliance and bring an end to the prolonged legal disputes.
Murad Ali Shah said the framework envisages compliance by insurance companies, withdrawal of pending litigation and settlement of past tax liabilities. He added that the agreement would help create a more stable and predictable environment for the insurance sector while encouraging wider access to insurance products.
The Sindh government has also proposed further reductions in tax rates for insurance agents and brokers. Under the budget proposals, the tax rate for insurance agents will be reduced from 5 per cent to 2 per cent, while the rate for insurance brokers will be lowered from 5 per cent to 3 per cent.
The chief minister said the reduction in tax rates would encourage insurance business activities and provide greater earning opportunities for agents and brokers operating across the province.
In another major relief measure, the government has proposed a substantial increase in the tax exemption threshold for individual life insurance policies. The exemption limit has been raised from insurance coverage of Rs500,000 to Rs3.5 million.
Officials believe the enhanced exemption threshold will encourage more individuals to purchase life insurance coverage, improve financial protection for families and support the overall growth of the insurance industry.
The latest measures form part of the Sindh government’s broader strategy to expand insurance penetration, promote financial inclusion and create a business-friendly environment for the sector.
Industry stakeholders are expected to welcome the settlement of tax-related disputes and the reduction in tax rates, which could help strengthen confidence in the insurance market and facilitate future growth.
