https://arab.news/4rnwq
- Principal amounts, death payouts and long-term policies remain exempt as Pakistan plans first-ever tax on insurance investment gains
- Senate panel expands proposed aircraft import concessions to all commercial airlines, clears tax-free security vehicles for SCO summit
ISLAMABAD: A Pakistani Senate committee on Monday approved a budget proposal to tax the profit component of life insurance policies from fiscal year 2026-27, marking the country’s first move to bring insurance investment gains into the tax net.
The measure comes as cash-strapped Pakistan tries to expand its revenue base under a $7 billion International Monetary Fund (IMF) bailout program, which requires the country to meet stringent fiscal targets.
The government has set a tax revenue target of Rs15.26 trillion ($54.8 billion), up 8.2 percent from the previous fiscal year, even though the Federal Board of Revenue missed its target for the outgoing fiscal year.
The Senate Standing Committee on Finance and Revenue on Monday reviewed budget proposals and endorsed the measure to tax profits from life insurance policies, exempting principal contributions.
“In a significant policy development, the committee approved a proposal to tax the profit component of life insurance policies from Tax Year 2026,” a statement issued by the Senate said. “The principal amount will remain exempt from taxation.”
The proposal maintained tax exemptions for payouts linked to death or disability, as well as life insurance policies that mature after seven years, preserving relief for long-term savings.
Islamabad is moving away from traditional revenue sources, introducing aggressive enforcement and exploring non-traditional tax avenues to fulfill its structural reform obligations under the IMF stabilization program.
The Senate committee also reviewed broader financial sector taxation proposals, including mutual funds and Islamic modaraba instruments. The lawmakers also approved the continuation of sales tax exemptions on inheritance-related property settlements.
In its meeting on Sunday, the panel broadened a proposed customs concession for the aviation sector. Initially intended to ease the import and lease of aircraft and spare parts solely for former state carrier, the Pakistan International Airlines (PIA), the committee voted to extend the facility to all commercial airlines.
“Officials informed members that the concessions were intended to support [PIA’s] operational and maintenance requirements, with customs authorities monitoring quantities and utilization,” a Senate statement said.
“The committee proposed broadening the facility to all airlines.”
Additionally, the panel approved sales tax exemptions for the import of bulletproof vehicles ahead of an upcoming Shanghai Cooperation Organization (SCO) summit and for counter-terrorism operations. The vehicle imports will require clearance from both the foreign and interior ministries.