ISLAMABAD โ Motorists in the federal capital are about to absorb one of the largest token tax hikes in Islamabad’s history. Under the Federal Budget 2026โ27, the annual token tax for cars up to 1,000cc is being raised from Rs1,500 to a flat Rs20,000 โ a 13x jump โ while larger engine slabs will move to a 0.25% to 1% of invoice value structure. The new rates take effect from July 1, 2026.
The revision, the first in nearly six years, has been proposed by the Ministry of Finance in the Finance Bill 2026โ27 and is being processed through the Islamabad Capital Territory (ICT) Excise and Taxation Department. Officials say the restructuring is meant to bring token-tax slabs in line with current vehicle prices and to widen the federal capital’s tax base, but motoring groups have warned the move will hit lower-middle-class families the hardest.
New vs Old Token Tax Rates in Islamabad
Here is the full comparison between the existing token tax structure and the new slabs proposed under Budget 2026โ27:
| Vehicle Category (Engine / Value) | Old Token Tax (Annual) | New Token Tax (Annual) | Change |
|---|---|---|---|
| Motorcycle (at time of registration) | Rs1,500 (filer) / Rs2,000 (non-filer) | Rs1,500 (filer) / Rs2,000 (non-filer) | Unchanged |
| Car up to 1,000cc | Rs1,500 | Rs20,000 (flat) | +1,233% |
| Car 1,001cc โ 1,300cc | Rs1,800 | 0.25% of invoice value | Slab-based |
| Car 1,301cc โ 1,600cc | Rs2,500 | 0.25% of invoice value | Slab-based |
| Car 1,601cc โ 2,000cc | Rs3,000 | 0.5% of invoice value | Slab-based |
| Car 2,001cc and above | Rs5,000 | 1% of invoice value | Slab-based |
| Vehicle value Rs2.5m โ Rs5m (any engine) | Nil | 0.5% of invoice value | New slab |
| Vehicle value Rs5m and above | Nil | 1% of invoice value | New slab |
Heads up: For most small and used cars in the ICT, the new tax is a single-digit-thousands bill. But for owners of late-model 1,800cc SUVs and luxury vehicles, the shift from a flat Rs3,000โ5,000 to a percentage-based formula will mean token tax bills anywhere from Rs50,000 to several lakh rupees a year. Track how this interacts with broader income tax slabs on our Pakistan salary tax slabs page.
How the New Tax Will Hit a Typical Islamabad Family
The shift from fixed amounts to a percentage of invoice value is the real story. Three quick examples illustrate the impact:
- Suzuki Alto (660cc) โ invoice Rs2.4 million: Old tax Rs1,500 โ New tax Rs20,000 (flat) for up to 1,000cc slab.
- Toyota Corolla 1.6L โ invoice Rs6.5 million: Old Rs2,500 โ New 0.25% = Rs16,250 per year.
- Honda Civic 1.8L โ invoice Rs8.5 million: Old Rs3,000 โ New 0.5% = Rs42,500 per year.
- Kia Sportage / Toyota Fortuner โ invoice Rs14 million: Old Rs3,000 โ New 1% on value over Rs2.5m = roughly Rs57,500 per year.
- Luxury SUV (Rs5m+ invoice): Old Rs5,000 โ New 1% = Rs50,000+ per year.
For everyday families with sub-1,000cc cars, the change is dramatic but bounded. For mid-size sedan and SUV owners, the percentage-based structure means the tax bill rises with the car price, which the government says is the fairer way to scale the tax.
Why the Hike Is Happening Now
Three factors are driving the new token tax structure:
- Six-year-old slabs have eroded โ the last revision was in 2020, before the post-2022 currency depreciation pushed vehicle invoice prices 2x to 3x higher.
- Federal-provincial tax harmonisation โ Punjab has already moved to a value-based formula in its Finance Bill 2026, and the federal capital is being brought into alignment.
- IMF revenue-target pressure โ the IMF’s ongoing $7 billion Extended Fund Facility (EFF) is pushing Pakistan to broaden its tax base and reduce reliance on indirect taxes like petroleum levies.
How and When to Pay the New Token Tax
The ICT Excise and Taxation Department has confirmed the revised rates will apply to token tax renewals due from July 1, 2026 onwards. New vehicle registrations from that date will be calculated on the new slabs. Existing registered vehicles will pay the new rate at their next annual renewal.
Payment can be made through the same channels that are already operational:
- Excise & Taxation ICT online portal via the official e-payment gateway.
- Bank branches designated by the ICT (HBL, UBL, MCB, Meezan, Allied Bank, Faysal).
- Mobile wallets (JazzCash, EasyPaisa) for small-amount renewals.
- Excise counters at the ICT Administration headquarters in G-7/4 Islamabad.
Reaction From the Auto Sector
Auto industry groups and motoring forums have criticised the new slabs, arguing the timing โ just as the wider auto market is recovering from the 2025โ26 supply-chain shock โ will deter fresh vehicle ownership. The Pakistan Automobile Manufacturers Association (PAMA) has separately warned that percentage-based token tax slabs overlap with the existing Federal Excise Duty (FED) and Additional Customs Duty on engine capacity, creating a triple-layer tax burden on car buyers.
โ Senior executive, Pakistan auto dealer association, June 2026
For context, the FBR is also expected to push for a re-categorisation of small cars (under 850cc) in the broader Sales Tax, FED and Customs Duty changes for Budget 2026โ27, which would further change the math on top of the new token tax.
What This Means for Islamabad Vehicle Owners
For most ICT-registered cars, the immediate cash impact in FY 2026โ27 will be:
| Vehicle Profile | Old Annual Cost | New Annual Cost | Increase |
|---|---|---|---|
| Suzuki Mehran / Alto (800cc) | Rs1,500 | Rs20,000 | +Rs18,500 |
| Suzuki Cultus (1,000cc) | Rs1,500 | Rs20,000 | +Rs18,500 |
| Toyota Corolla 1.6L (Rs6.5m) | Rs2,500 | Rs16,250 | +Rs13,750 |
| Honda Civic 1.8L (Rs8.5m) | Rs3,000 | Rs42,500 | +Rs39,500 |
| Kia Sportage 2.0L (Rs14m) | Rs5,000 | ~Rs70,000 | +Rs65,000 |
| Luxury SUV / Sedan (Rs25m+) | Rs5,000 | ~Rs2,25,000+ | +Rs2,20,000+ |
To estimate the new tax on your specific car, you can use the official ICT Excise portal or the FBR’s online Pakistan tax calculators.
Will Other Provinces Follow?
Punjab and Sindh have already moved to percentage-based or significantly higher flat-rate token tax structures in their own provincial Finance Bills for FY 2026โ27. Khyber Pakhtunkhwa and Balochistan typically follow the federal capital’s lead within one fiscal cycle. For the nationwide picture, see our coverage of the Federal Budget 2026โ27 top highlights and the section 7E / super-tax reforms.
Frequently Asked Questions
From July 1, 2026, the annual token tax for cars with engine capacity up to 1,000cc will be a flat Rs20,000, up from the previous Rs1,500.
The revised rates take effect from July 1, 2026, coinciding with the start of the new fiscal year 2026โ27.
For cars 1,001cc to 1,300cc and 1,301cc to 1,600cc, the new tax is 0.25% of invoice value. For 1,601ccโ2,000cc it is 0.5% of invoice value, and for 2,001cc and above it is 1% of invoice value.
No. The motorcycle token tax at the time of registration remains at Rs1,500 for filers and Rs2,000 for non-filers.
Late payment attracts a 200% penalty under the existing ICT Excise rules. Check our late filer penalties guide.
The token tax is collected by the Islamabad Capital Territory (ICT) Excise and Taxation Department under the federal government, since Islamabad is a federal capital territory. Each of the four provinces runs its own parallel system.
Token tax paid to the provincial or ICT Excise Department is generally not treated as a separate income-tax deduction, but it forms part of your vehicle’s running cost for accounting purposes.
Final Word
The 2026โ27 revision is the most significant token tax change Islamabad has seen since 2020. For a sub-1,000cc owner, the headline jump from Rs1,500 to Rs20,000 is the eye-catching number, but the deeper shift is the move to percentage-of-invoice-value for everyone else โ a structural change that will keep token tax bills tied to car prices for years to come. If you are renewing a vehicle registration in the ICT after July 1, budget for the new rate from day one, and consider paying the year in advance to avoid the 200% late-payment penalty.
