When a business pays a supplier, a contractor, a landlord, or a professional, it often has to deduct income tax from that payment and deposit it with the government. This is withholding tax. Getting the rate wrong is one of the most common compliance gaps we see in growing businesses: deduct too little and the shortfall can become your liability; deduct too much, and you damage a good supplier relationship.
Tax Year 2027 runs from 1 July 2026 to 30 June 2027. Below are the main rates from FBR's Withholding Tax Rate Card, updated as per the Finance Act, 2026.
First check: is the payee on the Active Taxpayers List?
Almost every rate has two versions: one for a payee who appears on FBR's Active Taxpayers List (ATL), and a higher one — usually double — for a payee who does not. Before releasing a payment, check the supplier's status on the ATL. It takes a minute and can halve the tax you deduct from a compliant supplier.
Payments for goods — section 153(1)(a)
- Company supplier: 5% (ATL) / 10% (not on ATL)
- Individual or AOP supplier: 5.5% / 11%
- Rice, cotton seed or edible oils: 1.5% / 3%
- Toll manufacturing: company 9% / 18%; others 11% / 22%
Payments for services — section 153(1)(b)
- IT and IT-enabled services: 4% / 8%
- Independent professionals (for example doctors, lawyers, architects, accountants, software engineers or developers working independently): 15% / 30%
- Electronic and print media advertising: 1.5% / 3%
- Other services not listed separately: 14% / 28%
Note the difference between the last two service lines: an independent professional is deducted at 15%, while general services fall at 14%. Classifying the service correctly matters.
Payments under contracts — section 153(1)(c)
- Contractor is a company: 7.5% / 15%
- Any other contractor: 8% / 16%
- Sportspersons: 15% / 30%
E-commerce payments — section 153(2A)
For goods or services ordered digitally through e-commerce platforms, including websites:
- Paid through digital means or banking channels: 1% / 2% of the gross amount
- Cash on delivery by courier: 2% / 4% of the gross amount
Rent of immovable property — section 155
- Landlord is a company: 15% / 30%
- Landlord is an individual or AOP: nil up to Rs. 300,000 a year; above that, a stepped scale applies — 5% of the amount over Rs. 300,000 up to Rs. 600,000, then Rs. 15,000 plus 10% of the amount over Rs. 600,000 up to Rs. 2,000,000, then Rs. 155,000 plus 25% of the amount over Rs. 2,000,000.
Exports of services — section 154A
- Computer software, IT or IT-enabled services by persons registered with the Pakistan Software Export Board: 0.25% of export proceeds
- Other exported services: 1%
Three habits that keep you compliant
- Check ATL status before every new supplier's first payment — and again periodically, because status can change.
- Classify the payment, not the supplier. The same vendor can supply goods on one invoice and services on another; each line follows its own rate.
- Deduct at the time of payment and deposit on time. Keep the payment record and the deposit evidence together so the supplier can claim credit and your records stand up to review.
Work it out in seconds
Use our free Withholding Tax Calculator — choose what you are paying for, tick whether the payee is an active taxpayer, and it shows the tax to deduct, the amount to pay the supplier and a step-by-step breakdown.
Rates in this article are taken from FBR's Withholding Tax Rate Card updated as per the Finance Act, 2026. FBR notes that the Income Tax Ordinance, 2001 always prevails over the card, and rates can change during the year. This article is general information, not tax advice — for a specific transaction, speak to a qualified adviser.
Need help setting up withholding tax checks in your payment process, or reviewing past deductions? Get in touch with HLM Consultants.