Pakistan’s mutual fund industry is experiencing rapid growth in 2025, reaching a new high as recent budget changes encourage investors to move away from fixed-return assets and into the stock market.
The government’s latest budget includes new tax policies that are expected to shift the focus of many investors. One major change is the increase in tax on income-generating mutual funds from 15% to 25%. However, mutual funds that invest in the stock market will continue to be taxed at a lower rate of 15%. This difference has created a clear signal: invest in stocks, save on taxes.
As a result, many mutual fund managers are now expected to redirect their portfolios from government securities and fixed returns into equity markets. This is likely to create more demand for shares, pushing up trading activity and prices.
Experts believe that the Pakistan Stock Exchange (PSX) could see another rally, with the KSE-100 index already touching record highs of over 122,000. If the trend continues, the market could even cross 125,000 points before the end of the current financial year—almost triple from where it was just two years ago.
At the same time, the government has raised the tax on profit from savings accounts and government bonds from 15% to 20%. Combined with recent cuts in interest rates, this change makes the stock market more attractive for individuals looking for better returns.
However, a key restriction may slow down new investments. The budget now bars non-filers people who haven’t submitted their tax returns from investing in mutual funds or stocks. While current investors are unaffected, new ones will need to become tax filers first.
Still, the overall outlook remains positive, with strong interest and growth expected in mutual fund activity in the months ahead.
