Govt keeps Capital Gains, dividend taxes unchanged in budget FY26

June 11, 2025 (MLN): The federal government has kept the capital gains tax on equities unchanged at 15% and has also maintained the tax rate on dividend income, as per the Finance Bill for the budget 2025–26.

Meanwhile, income from loans will now be taxed at 25%, aiming to incentivize mutual funds to shift their investments toward equities.

As a result, the KSE-100 Index kicked off today’s trading session on a strong note, opening at 123,415.60 with a gain of 1,391.16 points, or 1.14%.

The tax rate on interest income and profit from bank deposits has been increased from 15% to 20%, which is likely to enhance the attractiveness of equities.

Additionally, the government has proposed to bar ineligible individuals from investing in equities and mutual funds.

However, the impact of this restriction is expected to be minimal, as the majority of investors in these instruments are already tax filers with adequately declared assets.

This tax will be deducted by custodians, including banking companies maintaining Investor Portfolio Securities (IPS) accounts on behalf of holders, at the time of disposal of debt securities, including government securities.

According to the proposed amendment, this deduction shall not apply to disposals made through a registered stock exchange and settled through the National Clearing Company of Pakistan Limited (NCCPL).

Further amendments in section 152 clarify that banking companies and financial institutions will not deduct tax if the recipient is also liable to the Digital Presence Proceeds Levy and it has already been collected.

In section 152(1D), it is added that for debt instruments and government securities held for less than 12 months.