Khyber Pakhtunkhwa finance bill proposes new taxes, incentives, and Rs2.17 trillion budget

A copy of the Khyber Pakhtunkhwa government’s Finance Bill has been obtained, revealing proposals to maintain

A copy of the Khyber Pakhtunkhwa government’s Finance Bill has been obtained, revealing proposals to maintain several existing taxes while introducing amendments to various key tax structures across the province.

According to the documents, the government has proposed a significant relief measure for property owners. A 30 percent discount will be offered on lump-sum payment of outstanding dues on all residential properties. This incentive will be applicable to taxpayers who clear their dues by June 30, 2026. However, individuals failing to settle their liabilities by December 31, 2026, will face penalties as per the new regulations.

The Finance Bill also proposes new taxation measures for the transport sector. A yearly tax of Rs1,000 is suggested for motor rickshaws or three-wheeled vehicles. In addition, commercial vehicles with seating capacities ranging from 6 to 15 seats will be taxed at Rs400 per seat annually, while vehicles with more than 15 seats will be taxed at Rs500 per seat per year.

In the hospitality sector, the bill proposes the imposition of an annual tax on hotels. For establishments operating under a Point of Sale (POS) system, a 5 percent tax will be charged based on room bookings and occupancy. In cases where hotels are not integrated into the POS system, taxation will be calculated at 10 percent of the actual room rent, based on 50 percent of the available accommodation units.

The bill also includes an additional incentive, proposing a 20 percent discount for taxpayers who make lump-sum payments by June 2026.

According to the budget documents, the total proposed expenditure for the province stands at Rs2,170 billion. This includes Rs1,645.708 billion allocated for current expenditures and Rs524.292 billion earmarked for development spending.

The financial documents indicate that Khyber Pakhtunkhwa is expected to receive over Rs1,584 billion from federal tax transfers. Of this amount, more than Rs1,540 billion is projected to come from federal tax revenues under the national distribution system.

In addition, the province is expected to receive over Rs149 billion under the head of funds allocated for the ongoing war against terrorism. Revenue from oil and gas surcharges is estimated at more than Rs53 billion, while windfall levy on oil is expected to contribute over Rs24 billion to provincial resources.

The Finance Bill further outlines the provincial government’s development priorities, with more than Rs524 billion proposed for the Annual Development Programme (ADP) for the upcoming fiscal year. These funds are intended to support infrastructure projects, public services, and various socio-economic development initiatives across Khyber Pakhtunkhwa.

Officials say the proposed budget and Finance Bill aim to balance revenue generation with public relief measures while ensuring continued investment in development projects. However, the proposed tax changes are likely to generate debate among stakeholders in the transport, hospitality, and property sectors as the government moves toward final approval of the fiscal framework for the next financial year.