Economic Survey 2025-26 shows total tax exemptions cost the government Rs2,352.81 billion in fiscal year 2025-26, down from the revised Rs2,434.73 billion recorded in 2024-25.
The decrease of Rs81.92 billion represents a 3.36 percent decline in the overall cost of tax exemptions, concessions, reduced rates, and special tax treatments granted during 2025-26.
Revised Figures for 2024-25
The Ministry of Finance had originally reported tax expenditure of Rs5,840.2 billion for 2024-25 before issuing a formal errata, revising the figure significantly downward to Rs2,434.73 billion.
The downward revision of Rs1,850.5 billion for 2024-25 was officially published through a formal errata issued alongside the Economic Survey for that fiscal year.
Compared to the original Rs5,840.2 billion figure for 2024-25, the 2025-26 total of Rs2,352.81 billion reflects a nominal decrease of Rs3,487.39 billion on an unadjusted basis.
Sales Tax Exemptions
Sales tax exemptions remained the single largest contributor to revenue loss in 2025-26, totalling Rs1,273.977 million across all categories of goods and supplies.
The Federal Board of Revenue suffered Rs261 billion in sales tax revenue loss on imports during 2025-26, compared to Rs372 billion recorded during the previous fiscal year.
Sales tax exemptions on local supplies caused Rs305 billion in revenue loss during 2025-26, reflecting a significant decrease of Rs308 billion compared to Rs613 billion in 2024-25.
Exemptions under the Sixth Schedule of the Sales Tax Act caused Rs566.95 billion in revenue loss during 2025-26, compared to Rs985.594 billion recorded in the previous fiscal year.
The Eighth Schedule of the Sales Tax Act, covering conditional exemptions and reduced rates, caused a revenue loss of Rs635.841 billion during 2025-26 against Rs617.347 billion in 2024-25.
Zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act caused a revenue loss of Rs8.774 billion during 2025-26 against Rs6.834 billion in 2024-25.
The fixed sales tax regime on cellular mobile phones recorded zero revenue loss in 2025-26, compared to Rs87,950 million in revenue losses recorded during the previous fiscal year.
Income Tax Exemptions
Income tax exemptions accounted for Rs579.698 million in total revenue loss during 2025-26, making it the second largest category of tax expenditure recorded in the survey.
The cost of income tax exemptions fell to Rs579.7 billion in 2025-26 from Rs800.8 billion in 2024-25, reflecting an overall decrease of Rs221.1 billion across all income tax categories.
Income tax exemptions from total income alone had a revenue impact of Rs437.996 billion during 2025-26, representing the largest single component within the income tax exemptions category.
Special provisions of the Income Tax Ordinance caused a revenue loss of Rs10.9 billion in 2025-26, a significant decline compared to Rs41.1 billion recorded during the previous fiscal year.
Deductible allowance exemptions caused a revenue loss of Rs4.01 billion in 2025-26, compared to Rs16.4 billion in 2024-25, reflecting a notable decrease of Rs12.4 billion.
Reduced income tax rates had revenue implications of Rs50.71 billion during 2025-26, compared to Rs45 billion in 2024-25, reflecting a modest increase of approximately Rs5 billion.
Customs Duty Exemptions
Customs duty exemptions accounted for Rs499.136 million in revenue loss during 2025-26, completing the 3-category breakdown of total tax expenditure for that fiscal year.
The overall cost of customs duty exemptions declined to Rs499.14 billion in 2025-26 from Rs785.9 billion in 2024-25, reflecting a decrease of Rs286.76 billion in customs-related revenue losses.
Exemptions under Chapter 99 of the Customs Act caused a revenue loss of Rs17 billion in 2025-26, compared to Rs33.481 billion recorded during the previous fiscal year.
Concessions under the Fifth Schedule of the Customs Act caused a revenue loss of Rs205.655 billion in 2025-26, compared to Rs379.746 billion in 2024-25, a decrease of Rs174.091 billion.
Tariff concessions and exemptions available under Free Trade Agreements and Preferential Trade Agreements recorded zero revenue loss in 2025-26, compared to Rs61 billion in 2024-25.
Customs duty exemptions for the automobile sector, exploration and production companies, general concessions, and CPEC caused a combined revenue loss of Rs275.772 billion during 2025-26.
This figure reflects an increase of Rs142.48 billion compared to Rs133.236 billion recorded in 2024-25 across the same categories of customs duty exemptions and concessions.
Export-related customs duty exemptions recorded zero revenue loss in 2025-26, compared to Rs178.435 billion in revenue losses recorded during the previous fiscal year 2024-25.
Key Omissions in the Survey
The Economic Survey 2025-26 does not mention any revenue loss from tax exemptions granted to industrial units located in erstwhile tribal areas during the fiscal year.
The survey also excludes revenue loss from exempt business income granted to independent power producers and makes no reference to capital gains tax exemptions or their fiscal impact.
