Punjab unveils Rs5.335tr tax-free budget

LAHORE: Punjab Finance Minister on Monday unveiled a tax-free provincial budget for the fiscal year 2025-26, with a total outlay of Rs5,335 billion.

The budget features a record-breaking Rs1,240 billion allocated for development projects, while Rs2,706.5 billion has been earmarked for non-development expenditures.

The salaries of provincial employees have been raised in line with the federal government by 10 per cent, but pension has been raised by only 5pc, which is two percent lower than the raise announced by the federal government. The minimum wage in Punjab has been increased from Rs37,000 to Rs40,000 per month.

Major chunk of the resources amounting to Rs4,062 billion would come from the federal divisible pool of the Federal Board of Revenue (FBR). The target of provincial tax collection is set at Rs851.1 billion, of which the Punjab Revenue Authority is to collect Rs380 billion; the Board of Revenue would contribute Rs135.5, Excise and Taxation Rs70 billion and Mines and Minerals Rs30 billion.

The non-development expenditure includes Rs935 billion to be distributed through Provincial Finance Commission to the districts. The increase in pay and pension is also part of non-development expenses.

Expected provincial surplus is estimated at Rs740 billion which is subject to disbursement of the amount that the province expects to receive from FBR (subject to achievement of its tax revenue target).

The provincial government has allocated Rs494 billion for the social sector in its ADP, which is 40 per cent of the total development outlay. Development expenditure includes Rs148 billion for the education sector. Education budget is Rs661 billion, which is 24.4pc of the total non-development expenditure.

Honhaar scholarship programme has been allocated Rs15 billion to ensure that deserving students get enrolled. In the same way, an amount of Rs5.9 billion would go to fund higher education scholarships against undergraduate scholarship programme.

The laptop scheme has been continued with allocation of Rs15.1 billion under which 112,000 students would get laptops on merit. Last year 40,000 students were provided free laptops. For missing facilities in schools, an amount of Rs40 billion has been earmarked. Rs4 billion would be spent on outsourcing the government schools.

Establishment of Nawaz Sharif Centre in 10 districts is planned to establish Schools of Excellence for Early Childhood Education, for which Rs3 billion have been earmarked. Punjab Education Foundation will get Rs35 billion to provide financial help to students to get enrolled in private schools. School children in south Punjab will get free meals in schools, for which Rs7 billion have been allocated. The number of districts of south Punjab has been increased from 3 to seven. Rs1.5 million would be spent on free school meals for handicapped children.

Health sector this year will get Rs181 billion from the development outlay. Moreover, an amount of Rs450 billion is allocated to the health sector from the non-development expenses. This amount would be spent on upgrading existing facilities in various Punjab hospitals. For Lahore, an amount of Rs54 billion is earmarked for establishing Children Hospital-II & Institute of Genetic Blood Diseases; Institute of Surgical Orthopaedic & Medical Rehabilitation; Specialised Medical Hospital & Medical College; 1000 bedded Cardiac Institute; Medical University; State of the Art Diagnostic Lab; and Centre of Excellence for Nursing Education. Different district hospitals have also been for various district hospitals. For providing free medicines to the patients Rs79.5 billion against Rs56 billion allocated last fiscal. Other initiatives include Rs25 billion for free treatment of different diseases. Punjab government plans to upgrade BHUs with an amount of Rs20 billion.

The Punjab government has earmarked Rs123 billion for agriculture, livestock, irrigation and water in the new budget. Subsidy on the Green Tractor Scheme in phase-II would be Rs5.5 billion. A tractor program is being introduced this year with an allocation of Rs10.1 billion. The Kissan card would continue this year with an allocation of 6.3 billion. For solarisation of agriculture tube-wells, an amount of Rs8.7 billion has been earmarked.

Revival of citrus sector will be done through allocation of Rs1 billion. CM’s water efficient agriculture initiative would line 1,200 small water channels with Rs8 billion. For upgrading livestock through herd transformation, Rs8 billion have been earmarked. To control foot and mouth disease, Rs2 billion have been budgeted. CM Punjab Livestock Card is being introduced with an allocation of Rs4.4 billion. Numerous other initiatives have been introduced for irrigation, seeds and other farm related activities.

The provincial government will continue with the Apni Chhat Apna Ghar programme with an allocation of Rs150 billion under which 50,000 families will get a 15-year loan for building their houses.

Also, the Punjab government Monday introduced negative list-based sales tax regime in a transition of Punjab Sales Tax on Service Act 2012 from positive list through the finance bill by bringing 26 services in tax-free category of the negative list.

The new regime is adopted following the international best practice of taxing of services based on negative list. The negative list system is not new, as it already exists in many countries and its implementation would give substantial increase in the revenues to the provincial government by broadening the tax base.

Furthermore, the government has increased the amount of penalty for compliance purposes especially in respect of Electronic Invoice Monitoring System (EIMS).

The Punjab government proposed amendments to the Punjab Sales Tax on Services Act, 2012, mandating that all service providers must accept digital payments through debit/credit cards, mobile wallets, or QR codes. Non-compliance could result in penalties of up to Rs1 million, with a minimum fine of Rs400,000 on first offence and Rs300,000 for each subsequent violation. In the case of three violations, the authorities may seal the business premises for up to one month.

The proposed changes also introduce various technical adjustments, including restrictions on input tax adjustments to the standard rate of tax, apportionment in composite services, and bifurcation of tax liabilities between service providers and withholding agents in business-to-business transactions.

A substantial exemption list has also been issued, placing several services in the negative list, which makes them exempt from Punjab Sales Tax on Services (PSTS). These include:

*. Public healthcare services, including doctor consultation, hospital charges, and services provided by government hospitals.

*. Education services provided by public sector institutions.

*. Certain cosmetic and reconstructive treatments — exempt only for acid or burn victims.

*. Public transport and postal services provided by federal, provincial, or local governments.

*. Religious, charitable, and cultural services, including those provided by registered NGOs and international agencies with federal tax exemptions.

*. Construction services related to affordable housing schemes, foreign-aided projects, small-scale residential units, and diplomatic premises.

*. Personal care services (exempt only for non-air-conditioned parlours and salons).

*. Tour operator services for Hajj, Umrah, and Ziyarat.

*. Air travel services (exempt for Hajj/Umrah pilgrims, diplomats, and crew).

*. Agricultural storage services, but only for self-consumption of the produce.

*. Photography and filming (only for small, non-corporate roadside setups).

*. Residential property rentals, diplomatic missions, and book-printing contractors.

*. Government-sponsored or grant-funded advertisements, public health messages by WWF or UNICEF.

*. Medical diagnostic and pathology services.

*. Job-based manufacturing or packaging services.

*. Newspaper advertisements and services by currency exchange companies.

*. Port, airport, and bonded warehouse services — exempt only where the fee is collected under specific legal provisions.

These proposed amendments aim to broaden the digital economy, rationalise tax collection, and ensure relief for key public services and low-income groups.

Later on, Punjab Chief Minister Maryam Nawaz Monday declared that public funds are a sacred trust of the people, for which the government is accountable before Allah Almighty.

Presiding over the 27th meeting of the provincial cabinet, the CM said, “Success comes from sincerity and hard work. This year, we will work even harder than the last.” She highlighted that Punjab is presenting not only a zero-tax budget but also the largest development outlay in provincial history.

“We’ve already delivered a surplus budget of Rs740 billion despite meeting IMF conditions,” she noted. “More than 100 innovative programs have been launched, including the construction and expansion of 12,000 kilometres of roads and completion of 40,000 homes in just one year—something not achieved in the last four decades.”

The chief minister said that a record allocation has been made for health and education, ensuring free medicines and completion of essential facilities in government schools this fiscal year.

Addressing fiscal policy, Maryam said the government would focus on expanding the tax net instead of increasing tax rates. “The real impact isn’t in two or four mega projects — it’s in the 100 people-focused initiatives we’ve introduced,” she remarked.

She also noted that Punjab’s domestic debt has been reduced by a record 94pc, and that no financial scandal has emerged under her government thanks to transparency and e-tendering practices. She pledged that all expenditures would be presented before the provincial assembly.

“I’ve memorised figures for each department,” she added, calling the 2025–26 budget an “unprecedented” document. She also announced that performance-based bonuses for government employees are under consideration.

The cabinet, chaired by the CM, formally approved the Rs5,335 billion budget, including a Rs1,240 billion development package.

Maryam also directed the authorities to increase the minimum monthly wage to Rs40,000 and ensure digitisation of all wage payments. She further instructed that all wedding halls, marquees, restaurants, and farmhouses be registered by July 20, with immediate notification to be issued.

Senior Minister Marriyum Aurangzeb and the finance minister briefed the cabinet in detail during the session. Maryam praised the efforts of her team and acknowledged the hard work of senior officials, noting that Nawaz Sharif had also commended their performance.