The Government of Pakistan has introduced a new digital tax law aimed at bringing online earnings and services under the national tax net.

The legislation, part of broader efforts to regulate the digital economy, was announced following the presentation of the Federal Budget 2025–26 by Finance Minister Muhammad Aurangzeb on June 10.

Under the new law, income generated through YouTube, social media platforms, and various digital services—such as audio/video streaming, music platforms, telemedicine, e-learning, cloud computing, and online banking—will now be subject to taxation.

E-commerce websites, online stores, and digital marketplaces are also included in the tax framework. Banks and exchange companies facilitating payments to foreign service providers will be required to deduct a 5% tax on these transactions. The deducted tax must be deposited with the national treasury by the 7th of each month. Failure to do so will result in legal proceedings against the responsible financial institutions.

All social media platforms operating in Pakistan are now required to submit quarterly reports to the government. Similarly, institutions processing foreign payments must provide detailed quarterly reports, including the buyer's name, national identity card number, payment date, and amount.

Non-compliance will attract a penalty of Rs 1 million. Additionally, if a foreign digital company fails to pay taxes for three consecutive months, its bank transfers will be suspended.

This initiative reflects the government’s commitment to improving tax compliance and regulation within Pakistan’s rapidly expanding digital sector.