Most Pakistani businesses deduct income tax from payments they make, and getting the rate wrong is expensive in both directions — deduct too little and the shortfall is recoverable from you, deduct too much and you have withheld somebody else’s money. This article sets out the withholding rates for some of the most common business payments in Tax Year 2027, and explains the three things that decide which rate applies.
The rates below were read from the Income Tax Ordinance, 2001 as amended up to 30 June 2026, cross-checked against the Finance Act, 2026 and against FBR’s own Tax Year 2027 withholding rate card. Sources are listed at the end.
What these rates cover
Tax Year 2027 runs from 1 July 2026 to 30 June 2027. Rates changed for several provisions with effect from that date, so material written before the Finance Act, 2026 will show older figures.
Everything here is federal income tax withholding under the Income Tax Ordinance. Provincial sales tax on services has its own withholding rules and its own rates, and is not covered here.
This article covers selected common provisions, not the whole withholding regime. A payment that does not appear below is not a payment with no withholding obligation — it is a payment this article does not cover.
Why the transaction and the parties matter
There is no single rate for “business payments”. Three things have to be settled before a rate means anything:
- What the payment is for. Goods, services and the execution of a contract are three different clauses of section 153, at three different rates. Within services, the rate depends on which category the service falls into.
- Who is being paid. Several rates differ according to whether the recipient is a company or an individual or association of persons.
- Whether the recipient appears on the Active Taxpayers’ List. This changes the rate, but not always in the way people expect — see below.
Get any of those wrong and the rate is wrong, however carefully it was looked up.
Common withholding rates for Tax Year 2027
A selection of the provisions businesses meet most often. “ATL” is the rate where the recipient appears on the Active Taxpayers’ List; “non-ATL” is the rate where they do not.
| Payment or transaction | ATL | Non-ATL |
|---|---|---|
| Sale of goods, to a company | 5% | 10% |
| Sale of goods, to an individual or AOP | 5.5% | 11% |
| IT and IT-enabled services | 4% | 8% |
| Services outside the listed categories | 14% | 28% |
| Execution of a contract, by a company | 7.5% | 15% |
| Execution of a contract, by an individual or AOP | 8% | 16% |
| Rent of immovable property, to a company | 15% | 30% |
| Brokerage or commission, other agents | 12% | 24% |
| Profit on a bank deposit | 20% | 40% |
| Sale of immovable property (section 236C) | 2.75% | 11.5% |
Three notes on reading that table.
“IT and IT-enabled services” is a defined statutory category, not a description of anything computer-related. It has its own 4% proviso within section 153(1)(b); the surrounding listed category is 7%, and services outside all the listed categories fall to the 14% residual. A service being technical does not put it in the 4% category.
Rent to an individual or an association of persons is not a flat rate. It runs on a slab table beginning at nil, so a single percentage would be misleading and is deliberately not shown above. Only rent paid to a company is a flat 15%.
Several rows have close relatives that are not shown. Toll manufacturing, rice and edible oils, professional services, media advertising, port operating services, prize winnings, cash withdrawals and property purchases all have their own rates. The finder linked below covers them.
Withholding tax on services in Pakistan: section 153(1)(b)
The question asked most often is what to deduct from a payment for services. The withholding provision is clause (b) of section 153(1) of the Income Tax Ordinance, 2001. It requires a prescribed person who makes a payment, in full or in part and including an advance, to a resident person for the rendering or providing of services to deduct tax from the gross amount payable, at the rate in Division III of Part III of the First Schedule. The gross amount includes sales tax, if any.
Who must deduct, and when
Section 153(9) lists the “prescribed persons”: the Federal Government; a company; an association of persons constituted by or under law; a non-profit organisation; a foreign contractor or consultant; a consortium or joint venture; and an association of persons or an individual with turnover of Rs 50 million or above. A payer outside that list is not obliged to deduct under this section.
The clause does not apply where the payment is less than Rs 30,000 in aggregate during a financial year. Section 153(9) also states that “services” includes the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee. Pay to an employee is salary and is dealt with separately, under section 149.
Rates by type of service
Within services the rate turns on the kind of service, and then on whether the recipient is on the Active Taxpayers’ List. FBR’s Tax Year 2027 withholding tax rate card, updated up to 30 June 2026 as per the Finance Act, 2026, lists the same service rows and rates, and the rates were also read from Part III of the First Schedule to the Ordinance as amended up to 30 June 2026; the Ordinance prevails.
| Kind of service | ATL | Non-ATL |
|---|---|---|
| IT services and IT-enabled services, as defined in section 2 | 4% | 8% |
| Services in the statutory list, such as transport, freight forwarding, courier, manpower outsourcing, hotel, security guard, engineering, warehousing, travel and tour, and inspection, testing and training services | 7% | 14% |
| Independent professional services, such as doctors, lawyers, architects, accountants, software engineers or developers, working independently | 15% | 30% |
| Advertising services rendered by electronic and print media | 1.5% | 3% |
| Terminal and port operating services, payable to companies | 12% | 24% |
| Any other service | 14% | 28% |
Four points decide most of the difficult cases.
- The 7% list is specific. The 7% rate applies to the services the Ordinance names. A service that is not named falls to the 14% residual unless another row fits. The 7% rate also carries an explanation limiting it to a provider whose services are subject to withholding on gross receipts and who has not agitated taxation of gross receipts before any court of law.
- The medium matters for advertising. Payments to print and electronic media for advertising are 1.5%. Advertising services by any other means sit in the 7% list.
- “Working independently” is part of the professional-services row. A doctor or lawyer engaged as an employee is not within it.
- Rent is not a service payment. Rent is governed by section 155 and has its own rates, as explained below.
Digitally delivered services through an e-commerce platform are charged differently and are not covered by these rows; see the section on what this article does not cover.
Worked invoice example for services
A company pays a security guard services provider an invoice of Rs 1,000,000 plus sales tax of Rs 160,000 (an assumed figure, for illustration only). The gross amount payable is Rs 1,160,000.
- Provider on the ATL, service in the statutory list: 7% of Rs 1,160,000 = Rs 81,200, leaving Rs 1,078,800 to be paid to the provider
- Provider not on the ATL: 14% of Rs 1,160,000 = Rs 162,400
The amounts are estimated withholding amounts, not a final tax liability. They assume the service falls within the statutory list and that the 7% explanation is met. Had the same invoice fallen to the residual row, the ATL rate would have been 14%.
Our rate finder asks which of these kinds of service the payment is, who is paying and who is being paid, and returns the rate with its provision.
Why non-ATL does not always mean “double”
The Tenth Schedule sets the consequence of a recipient not appearing on the Active Taxpayers’ List. Rule 1 increases the rate by one hundred per cent — which is where the familiar “double it” shortcut comes from, and for most of the rows above it happens to be right.
But Rule 1 carries provisos, and where a proviso names a section, the doubling does not apply to it. The Tenth Schedule gives that section its own figure instead.
Section 236C is the clearest example. The base rate on the sale or transfer of immovable property is 2.75%. Doubling would give 5.5%. The Tenth Schedule does not double it — it specifies 11.5%, which is more than four times the base rate:
- Section 236K, on the purchase side, is given a table of its own: 10.5%, 14.5% or 18.5% according to fair market value.
- Section 231B, on motor vehicles, is increased by two hundred per cent rather than one hundred.
- Sections 236G and 236H have their own specified figures.
So the non-ATL consequence is section-specific. Doubling is a default, not a rule, and applying it to a section that has its own proviso will produce a figure that is not merely a little wrong.
Worked examples
Each example applies the verified rate to a stated base. Where an amount is shown it is an estimated withholding amount — the rate applied to the figure given, not a final tax liability.
Sale of property for Rs 20,000,000 under section 236C
- Seller on the ATL: 2.75% of Rs 20,000,000 = Rs 550,000
- Seller not on the ATL: 11.5% of Rs 20,000,000 = Rs 2,300,000
Had the doubling shortcut been used, the second figure would have come out at Rs 1,100,000 — short by Rs 1,200,000 on a single transaction.
IT-enabled services invoice of Rs 500,000
- Provider on the ATL: 4% of Rs 500,000 = Rs 20,000
- Provider not on the ATL: 8% of Rs 500,000 = Rs 40,000
This assumes the service genuinely falls within the statutory IT and IT-enabled services definition. If it does not, the applicable rate is 7% or 14% and the deduction is materially larger.
Goods supplied by a company for Rs 2,000,000
- Supplier on the ATL: 5% of Rs 2,000,000 = Rs 100,000
Had the same goods been supplied by an individual or an association of persons, the rate would be 5.5%.
Rent of Rs 1,200,000 paid to a company
- Recipient on the ATL: 15% of Rs 1,200,000 = Rs 180,000
The rate is settled. Whether that deduction is final, minimum or adjustable tax in the recipient’s hands is a separate question, and one this article does not answer — see below.
Who has to deduct the tax?
There is no general switch that makes a business a “withholding agent” for everything. Each section names the persons it obliges, and those sets genuinely differ.
Section 153 applies to a defined list of “prescribed persons”. Section 155 names a different set for rent. Section 151 turns on who is paying the profit. Section 236C is collected from the seller by the person responsible for registering, recording or attesting the transfer — which the section expressly extends beyond the registrar to housing societies and private real-estate projects.
The practical consequence is that “are we required to deduct on this payment?” has to be answered for the section in question, not for the business in general. A company obliged to deduct under section 153 is not automatically obliged to deduct under every other section — and, occasionally, the answer is that this particular payment carries no obligation for you at all.
The rate is one question; final, minimum or adjustable is another
Knowing the rate does not tell you how the tax is treated in the recipient’s hands. A deduction may be final tax, minimum tax, or adjustable against the recipient’s eventual liability, and that character affects the recipient’s return rather than the amount you deduct.
For rent, profit on debt and brokerage or commission, we do not state that character here. The rates are verified; the character is a separate determination that depends on provisions we have not set out, and a confident label would be worth less than an honest gap. If the treatment matters to your position — and for the recipient it usually does — it should be settled on the facts rather than assumed from a rate table.
What this article does not cover
Some categories are governed separately and the rates above do not reach them:
- Digitally ordered goods and digitally delivered services through an e-commerce platform are charged under section 153(2A), with collection by a payment intermediary or courier rather than by the buyer. The 14% residual does not apply to them.
- Return on investment in sukuk is charged under Division IB, not under the ordinary profit-on-debt rates. The 15% residual does not apply to it.
- Salary is deducted under section 149 at an average rate on estimated annual salary, which is not a rate a rate table can supply. See our article on Tax Year 2027 salary tax rates and the Pakistan Salary Tax Calculator.
- Sections 236G and 236H, on sales to distributors, dealers, wholesalers and retailers, exist and may apply to you. They are outside both this article and the current version of our finder.
Provincial sales tax withholding, sales-tax withholding generally, and payments to non-residents are all outside this article as well.
Find the rate for your transaction
Because the rate turns on facts rather than on a category name, a table can only take you so far. Our Pakistan Withholding Tax Rate Finder asks plain factual questions about the payment, the payer and the recipient, and returns the rate to review together with the provision it comes from and its official source.
Where a transaction is charged under a provision it does not model, it says so rather than offering a nearby rate — which, for e-commerce and sukuk in particular, is the difference between a right answer and a confidently wrong one.
It sits alongside our other practical tools for Pakistan tax and corporate compliance.
Sources and limitations
The rates in this article were read from the operative legislation and cross-checked against FBR’s own rate card:
- Income Tax Ordinance, 2001 — amended up to 30 June 2026 (FBR): the First Schedule for the rates, and the Tenth Schedule for the consequences of not appearing on the Active Taxpayers’ List.
- Finance Act, 2026 (FBR): the Act that made the Tax Year 2027 changes.
- Withholding Income Tax Rate Card, Tax Year 2027 (FBR): used as a cross-check, not as the authority.
Checked against those sources on 29 August 2026.
These sources, and the others our tools rely on, are listed with the date each was last checked on our sources and references page.
This article covers selected common federal income-tax withholding provisions. It is not a complete list, and it is not advice on a particular transaction. Whether a provision applies, and at what rate, depends on the facts of the payment, the payer and the recipient; ATL status is one of those facts and not the only one. Getting withholding right, and reconciling what was deducted against the return it feeds, is part of our income tax work. Where the classification of a payment is genuinely uncertain, it is worth settling before the deduction is made rather than afterwards — please get in touch if that would help.
This note is general information, not advice on your particular circumstances. Tax law and deadlines change — please confirm the position before acting on it.