ISLAMABAD: The Federal Board of Revenue (FBR) has recommended a hike in withholding tax for vehicles above 1300 CC engines for the upcoming Budget 2025-26, media reports said on Wednesday.
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Currently, 2 percent withholding tax is being charged on the total value of vehicles with engine capacity of 1300 CC to 1600 CC. For cars upto 1800 CC the tax rate is 3 percent, and it progressively increases to 5 percent for cars upto 2000 CC, 7 percent for vehicles upto 2500 CC, 9 percent for vehicles upto 3000 CC, and 12 percent for cars with engines above 3000 CC capacity.
However, the FBR has recommended increase in this rate of tax as a means to generate additional tax revenue. In the previous budget, taxes on vehicles were shifted from fixed tax rates to value-based taxes with vehicle prices becoming the primary determinant of withholding tax calculations. As a result, during FY25, the FBR has reported collection of over Rs 4 billion in vehicles tax.
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If the recommendation is accepted, the revenue projections for FBR are even higher for the upcoming fiscal year.
