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

• IMF wants harmonisation of taxes, says FBR chairman.
• NA panels suggests tax hike on cash withdrawal by non-filers.
• Recommends 0.8% withholding tax, rejects proposal of 1% tax.

ISLAMABAD: The International Monetary Fund (IMF) has rejected the Federal Bureau of Revenue's (FBR) proposal to allow 25% tax rebates to teachers and researchers in the budget 2025-26, The News reported on Sunday.

In the Finance Bill 2025-26, the FBR proposed a holding period of 12 months for availing the concessionary tax regime on investments 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 a "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 chief 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 the 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 the holding period for keeping investment in SCRA. There is a need to discourage short-term investments in the SCRA.

If they keep investments above a year period, the concessional tax regime should be applicable. To avoid volatility in the market, the holding period should be one year for making investments in the said accounts.

According to the SBP assessment, there would be no immediate or significant impact on investment in case a year holding period is introduced, the SBP official added. However, the NA panel proposed a months holding period for availing the concessionary tax regime on SCRA investments.

On the rebate for teachers and researchers, FBR Chairman Rashid Mahmood Langrial informed the National Assembly Standing Committee on Finance that the IMF rejected a proposal of the FBR to allow 25%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 harmonisation of taxes so they did not allow tax rebates to teachers and 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% to 0.8% 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% to 1%.

On the taxation of salaried individuals, the FBR chairman informed that only 1% tax would be applicable on salaried individuals where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000.

Originally published in The News