Complete Guide to Withholding Tax in Pakistan — All Categories & Rates

What Is Withholding Tax?

Withholding tax (WHT) is tax deducted at the source of income before it reaches you. Instead of the taxpayer paying tax directly to the FBR, the person making the payment (the withholding agent) deducts the tax and deposits it with the government on your behalf. Pakistan has one of the most extensive withholding tax regimes in the world, covering dozens of transaction categories.

Withholding taxes serve two purposes: they provide the government with a steady stream of revenue throughout the year, and they bring undocumented transactions into the tax net by collecting tax at the point of transaction.

Filer vs Non-Filer: Why It Matters

Pakistan's tax system imposes significantly higher withholding tax rates on non-filers compared to those who appear on the FBR's Active Taxpayer List (ATL). In many cases, the non-filer rate is double or even triple the filer rate.

This makes filing your tax return one of the most impactful financial decisions you can make. For more on the benefits of being an active taxpayer, see our guide on the benefits of the Active Taxpayer List.

Major Withholding Tax Categories

Section 149 — Salary Income

Every employer is required to deduct tax from employee salaries based on the applicable income tax slab rates. The employer calculates the employee's annual taxable salary, determines the tax liability, and deducts it in equal monthly installments.

• Tax is deducted at the average rate applicable to the employee's projected annual income
• Employers must account for tax credits, deductible allowances, and other adjustable taxes
• Monthly tax deducted must be deposited with the FBR by the 7th of the following month

Section 151 — Profit on Debt (Banking Transactions)

Banks are required to deduct withholding tax on profit paid on deposits, savings accounts, and other debt instruments:

• Filers: 15% on profit from debt
• Non-filers: 30% on profit from debt

This is one of the categories where the filer/non-filer difference is most noticeable. A non-filer loses nearly a third of their bank profit to withholding tax. For more details, see our guide on withholding tax on banking transactions.

Section 153 — Payments for Goods, Services, and Contracts

This is one of the broadest withholding tax sections, covering payments made by specified persons (companies, AOPs, government entities) to suppliers:

Goods:

• Filers: 4.5% of the gross amount
• Non-filers: 9% of the gross amount

Services:

• Filers: 8% of the gross amount
• Non-filers: 16% of the gross amount

Contracts (execution of contracts):

• Filers: 7% of the gross amount
• Non-filers: 14% of the gross amount

For companies, these withholding taxes are generally adjustable — meaning they can be claimed as credit against the final tax liability. For individuals and AOPs in certain categories, the withholding tax may be treated as final tax (not adjustable).

Section 155 — Income from Property (Rent)

Tenants who are specified persons must deduct withholding tax on rent payments:

• Filers: 15% of the gross rent (for commercial property)
• Non-filers: 30% of the gross rent

For individuals receiving rental income, this withholding tax is adjustable against their total tax liability on their return.

Section 231A — Cash Withdrawal from Banks

Banks deduct withholding tax on cash withdrawals exceeding PKR 50,000 per day:

• Filers: 0.6% of the withdrawal amount
• Non-filers: 6% of the withdrawal amount

This is one of the starkest filer vs non-filer differences — non-filers pay 10 times the rate. This tax is adjustable for filers.

Section 231AA — Advance Tax on Transactions with Banks

This section covers various banking transactions including demand drafts, pay orders, and other instruments:

• Filers: 0.6% of the transaction amount
• Non-filers: 6% of the transaction amount

Section 236 — Telephone and Internet Services

Telecom companies deduct advance tax on mobile phone bills and prepaid recharges:

• Filers: 15% of the bill amount (including sales tax)
• Non-filers: 25% of the bill amount

This tax can be claimed as adjustable in your annual return. For instructions on obtaining certificates, see our guides on downloading tax certificates from Telenor and PTCL.

Section 236C — Advance Tax on Sale/Transfer of Immovable Property

When immovable property is sold or transferred, the buyer is required to collect advance tax from the seller:

• Filers: 3% of the property value (as per FBR valuation table)
• Non-filers: 10.5% of the property value

For property purchases (Section 236K), the buyer also pays advance tax:

• Filers: 3% of the property value
• Non-filers: 10.5% of the property value

The difference between filer and non-filer rates on property transactions is enormous and can amount to hundreds of thousands or even millions of rupees on a single transaction.

Section 236H — Advance Tax on Purchase of Motor Vehicles

Tax is collected at the time of registration or transfer of motor vehicles:

• Rates vary by engine capacity and whether the buyer is a filer or non-filer
• For vehicles up to 850cc: Filer PKR 10,000 / Non-filer PKR 25,000
• For vehicles 851-1000cc: Filer PKR 20,000 / Non-filer PKR 50,000
• For vehicles 1001-1300cc: Filer PKR 25,000 / Non-filer PKR 75,000
• For vehicles 1301-1600cc: Filer PKR 50,000 / Non-filer PKR 150,000
• For vehicles 1601-1800cc: Filer PKR 75,000 / Non-filer PKR 200,000
• For vehicles 1801-2000cc: Filer PKR 100,000 / Non-filer PKR 300,000
• For vehicles above 2000cc: Filer PKR 150,000 / Non-filer PKR 450,000

How to Claim Adjustable Withholding Taxes

Most withholding taxes in Pakistan are adjustable, meaning they can be credited against your final income tax liability when you file your annual return. Here is how to claim them:

1. Collect certificates and statements: Obtain withholding tax certificates from all sources — banks, employers, telecom companies, property buyers/sellers, etc.
2. Verify amounts on IRIS: Log in to the FBR IRIS portal and check your withholding tax credit statement. All taxes deducted against your CNIC/NTN should appear here.
3. Report in your tax return: Enter each withholding tax amount in the appropriate section of your income tax return on IRIS.
4. Calculate the difference: If your total withholding taxes exceed your final tax liability, you are entitled to a refund. If they fall short, you must pay the balance.

It is critical to verify that all withholding taxes have been correctly reported against your NTN/CNIC. Discrepancies are common, especially with telecom tax and banking tax deductions.

Final Tax vs Adjustable Tax

Understanding this distinction is essential:

• Adjustable (minimum) tax: The withholding tax is a credit against your annual tax liability. If your total tax exceeds the withholding, you pay the difference. If the withholding exceeds your tax, you claim a refund. Most withholding taxes are adjustable for filers.
• Final tax: The withholding tax IS your total tax liability for that income. You do not need to include that income in your annual return, and you cannot claim a refund on it. Certain categories of income for non-filers and specific sections are treated as final tax.

Need Help Managing Your Withholding Taxes?

With dozens of withholding tax categories and varying rates, keeping track of all deductions and ensuring correct claims can be overwhelming. Our income tax specialists reconcile all your withholding tax credits, ensure nothing is missed, and file your return for maximum refunds. Contact us for a free consultation.