CAF 2 Taxation – Major Changes for Current Attempt
First Edition (July 2025 / Tax Year 2026) vs Second Edition (September 2026 / Tax Year 2027)
Edition Snapshot
| Area | First Edition | Second Edition |
|---|---|---|
| Publication | July 2025 | September 2026 |
| Practical / scenario basis | Tax Year 2026 | Updated for later law / Tax Year 2027 provisions |
| Chapter structure | 19 chapters | 19 chapters – broadly same sequence |
| Main effect | Older rates and provisions | Finance Act 2026 changes and TY 2027 treatment incorporated |
Major Technical Changes
| Topic | Old Book | New Book |
|---|---|---|
| Salary tax slabs | Key upper slabs included 23% for Rs.2.2m–3.2m, 30% for Rs.3.2m–4.1m, and 35% above Rs.4.1m. | Revised progression: 20%, 25%, 29%, 32%, then 35% above Rs.7m. |
| 9% salary surcharge | Applied to salaried individuals where taxable income exceeded Rs.10m. | Ceases to apply from Tax Year 2027 onwards. |
| Sec. 64D tax credit | Point-of-sale machine credit; lower of actual investment or Rs.150,000 per machine. | Replaced by broader integration credit: 10% of qualifying electronic-resource investment used for Board system integration. |
| Sec. 65G credit | Specified industrial undertakings credit appeared in the old tax-credit list. | No longer appears in the new Chapter 11 tax-credit list. |
| Digital transactions | 1% digital/banking and 2% CoD tax described as final discharge. | For turnover above Rs.200m, tax becomes adjustable; taxpayers up to Rs.200m may opt out of final regime from TY 2027 onwards. |
Capital Gains & Securities
| Area | First Edition / TY 2026 | Second Edition / TY 2027 |
|---|---|---|
| Securities acquired after 1 July 2024 | Active taxpayer: 15%. Non-active taxpayer: progressive rates for individuals/AOPs or 29% for companies, subject to minimum 15%. | Active taxpayer remains 15%. For a non-active taxpayer, securities acquired after 1 July 2025 are specifically taxed at 30%; older post-1 July 2024 cases retain the progressive / corporate framework with minimum 15%. |
| Loss rules | Capital losses generally carried forward up to six years; securities loss rules separately apply. | General six-year capital-loss rule remains, while section 37A securities losses are separately limited to three tax years. |
New Procedural / Legal Developments
| New Area | What the Second Edition Adds / Updates |
|---|---|
| Faceless income-tax proceedings – Sec. 122E | Audit under sections 177/214C, orders under section 111, assessments and certain rectification proceedings may be conducted in a faceless manner as prescribed by the Board. E-hearing and officer-identity confidentiality are also addressed. |
| Faceless sales-tax proceedings – Sec. 11H | The Sales Tax Act discussion now covers faceless audit, orders and rectification for specified cases, including E-hearing procedures. |
| Federal Constitutional Court | The new book reflects the Federal Constitutional Court in relevant constitutional expenditure and appellate / petition discussions. |
| Input-tax adjustment and digital integration | Finance Act 2026 enables the Board to reduce or enhance adjustable input-tax limits based on compliance with production monitoring, digital invoicing, e-Bilty, POS or other electronic systems. |
Important Exam Implication
Do not mix old TY 2026 rates with TY 2027 rules. Questions on salary tax, tax credits, securities, digital transactions, assessment/audit and appeals should be solved from the September 2026 edition unless the question specifically gives another tax year.
Student Guidance
- Use the Second Edition for current preparation. The First Edition remains useful only for concepts that have not been amended.
- Check the tax year before solving. A correct method with an old rate can still produce a wrong exam answer.
- Update old self-made notes. Especially mark salary slabs, Sec.64D, Sec.65G, securities rates and faceless proceedings.
- For mocks and daily MCQs, questions should now be drafted from the September 2026 study text unless ICAP issues a later update.
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