IMF has nixed 25% rebate for teachers, NA panel told

ISLAMABAD: The International Monetary Fund (IMF) has rejected the FBR’s proposal to allow 25 percent tax rebates to teachers and researchers in the budget 2025-26. In the Finance Bill 2025-26, the FBR proposed a holding period of 12 months for availing the concessionary tax regime on investment made in Special Convertible Rupee Accounts (SCRA).

The National Assembly Standing Committee on Finance met under the chairmanship of Syed Naveed Qamar at the Parliament House on Saturday. While reviewing of Finance Bill, the chairman argued that the condition of “holding period” would discourage investment in the SCRA. The government should set around 3-6 months holding period for making investments in the SCRA. The FBR Chairman endorsed the viewpoint of Naveed Qamar. The FBR Chairman said that we can propose a six-month holding period. The FBR has already discussed the proposal with the State Bank of Pakistan (SBP). In case of a three-month proposal, this should be subject to the approval of the federal cabinet.

Muhammad Ali Malik, Executive Director of the SBP informed the NA panel online that the proposed amendment had nothing to do with the Roshan Digital Account (RDA). The proposed change is related to the SCRA. There should be some limitation of holding period for keeping investment in SCRA. There is need to discourage short-term investments in the SCRA. If they keep investments above one year period, the concessional tax regime should be applicable. To avoid volatility in market, the holding period should be one year for making investment in the said accounts. According to the SBP assessment, there would be no immediate or significant impact on investment in case one year holding period is introduced, the SBP official added. However, the NA panel proposed six months holding period for availing concessionary tax regime on SCRA investments.

On the rebate for teachers/researchers, the Chairman FBR Rashid Mahmood Langrial informed the National Assembly Standing Committee on Finance that the IMF rejected proposal of the FBR to allow 25 percent tax rebate to teachers and researchers from July 1, 2025. The FBR, he said, approached the Fund twice but they did not agree to it. The IMF wants harmonization of taxes so they did not allow tax rebate to teachers/ researchers. However, he stated that the government could provide a subsidy from its budgetary resources if possible. But the Minister of State for Finance regretted that there is no fiscal space available in 2025-26.

The NA committee recommended that the withholding tax should be increased from 0.6 percent to 0.8 percent on cash withdrawals from banks by non-filers. However, the committee rejected the proposal of the Senate Standing Committee on Finance to raise the tax rate from 0.6 percent to 1 percent.

On the taxation of salaried individuals, FBR Chairman informed that only 1% tax would be applicable on salaried individuals where taxable income exceeds Rs 600,000 but does not exceed Rs 1,200,000.