The Federal Board of Revenue (FBR) has proposed an increase in the Withholding Tax (WHT) rates for vehicles with engine capacities exceeding 1,300cc, as part of the federal budget for the fiscal year 2025-26.
The move is aimed at enhancing government revenue collection in the upcoming financial cycle.
According to official sources, the revised tax structure would raise WHT rates across multiple engine capacity brackets. Currently, the WHT is charged at a tiered rate:
- 2% for vehicles between 1,301cc and 1,600cc
- 3% for 1,601cc to 1,800cc
- 5% for 1,801cc to 2,000cc
- 7% for 2,001cc to 2,500cc
- 9% for 2,501cc to 3,000cc
- 12% for vehicles above 3,000cc
The proposed changes will increase these rates further, though exact revised figures have yet to be disclosed.
This proposal builds on the FBR’s recent efforts to widen the tax base and align vehicle taxation with value and engine capacity. In 2024, the FBR collected over Rs4 billion in withholding tax from the automotive sector. With the proposed adjustments, officials expect a significant boost in tax revenue for the next fiscal year.
The move follows last year’s transition to a value-based taxation model, which replaced fixed advance taxes on vehicles with levies calculated according to the vehicle’s price, aiming to make tax collection more equitable and responsive to market dynamics.
The proposal will be reviewed and possibly finalized as part of the federal budget 2025-26, expected to be announced in June.
