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Committee backs mandatory electronic tax filing, social media tax, and legal protection for inherited property
The changes amend India’s 2021 IT rules, which have already been a flashpoint between Prime Minister Narendra Modi’s government and global technology companies. PHOTO: PIXABAY
The National Assembly’s Standing Committee on Finance on Thursday approved a series of recommendations for the proposed Finance Bill 2026-27, including the imposition of a 5% withholding income tax earned through social media platforms.
Other recommendations included the abolition of a 1% advance tax on exporters and changes to the taxation of inherited properties.
The committee, chaired by Syed Naveed Qamar, resumed its meeting after a lunch break to examine the proposed finance bill for the upcoming fiscal year. During the session, officials of the Federal Board of Revenue (FBR) briefed lawmakers on a range of tax reforms and proposed measures.
Among the key proposals approved was a 5% withholding income tax earned through social media platforms, particularly YouTube.
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FBR officials told the committee that the tax would apply when YouTubers and other content creators repatriated their dollar earnings to Pakistan through banking channels. They said income generated through social media platforms had reached around Rs10 billion.
The committee also approved a proposal to abolish the 1% advance tax imposed on exporters, a move seen as providing relief to the export sector.
Lawmakers also considered proposals relating to capital gains tax on inherited properties and plots.
FBR officials said the cost base of inherited property would be determined according to its market value on the date of the original owner’s death. They explained that if a plot was valued at Rs80 million at the time of the owner’s death and was later sold for Rs100m, capital gains tax would apply only to the Rs20m increase in value.
However, Qamar proposed that the cost base should instead be calculated from the date ownership of the property is transferred to the heir.
The committee approved the recommendation to determine the cost base from the date of transfer of ownership. It also endorsed a proposal to provide legal protection to inherited properties transferred through family settlement arrangements.
Separately, the committee approved a proposal making the electronic filing of income tax returns mandatory.
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FBR officials said all future income tax returns would have to be submitted through the Inland Revenue Information System, while companies would also be required to submit their financial statements in machine-readable format.
The officials said that although most tax returns had been filed digitally since 2013, a limited number of manual returns were still being accepted in a few cities, including Gujranwala. Those manual submissions would now be discontinued.
The committee also approved proposals relating to an algorithmic settlement mechanism.
According to FBR officials, taxpayers opting for the mechanism would be allowed to file revised tax returns without obtaining prior approval from the commissioner. They added that such taxpayers would not face any separate penalty or surcharge, a measure aimed at making the tax system simpler and more transparent.