Withholding Taxes in Pakistan

Short History

Withholding is an act of deduction or collection of tax at source, which has generally been in the nature of an advance tax payment. It is an effective mechanism and important/timely source of revenue. Their contribution is about 41 percent of total direct tax revenues. Increase from Rs.5 (b) in 1991 to above Rs 169(b) in 2007 speaks of exponential growth and consequential heavy reliance on withholding taxes in Pakistan.

Under the repealed Income Tax Act, 1922, tax was deducted from two main sources of income; namely, salaries and interest on securities. Over the period of time, Withholding Tax net was extended, by steadily introducing different Provisions in the Tax Laws. The repealed Income Tax Ordinance, 1979, brought in all the provisions of the Income Tax Act, 1922. However, in the 1990s, withholding tax net was expanded extensively by providing for withholding tax on a wider variety of transactions and making most of them presumptive. Provisions of the Income Tax Ordinance, 2001, are more or less the same, except for a few changes and additions. Important withholding provisions relate to salary, imports, exports, commission and brokerage, dividend, contracts, profit on debt, utilities, vehicles tax, stock exchange-related provisions and non-residents, etc. with varying rates.

About Withholding Tax

Withholding Tax Rates –  (Updated Up to 30th June, 2015)

Withholding Tax  (Rates Card) (Updated Up to 30th June, 2015)
Application of correct withholding tax rates for filers and non-filers as per active taxpayers list (Letter from DG WHT to Post Office ,Excise and Taxation Etc)
Updated withholding tax rates for sections 151(1)(a) of the income tax ordinance, 2001 as per finance Act,2015 (Letter from DG WHT to National Savings Etc)
Updated Tax Rates for Sections 151(1)(a)&234 of the Income Tax ordinance, 2001 as per Finance Act,2015 (Letter from DG WHT to Post Office)
Updated Tax Rates for Sections 231B &234 of the Income Tax ordinance, 2001 as per Finance Act,2015(Letter from DG WHT to Secretaries Excise and Taxations )

Withholding Tax-Standard Operating Procedures (SOPs) :

SOP For Monitoring of Withholding Taxes

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Download (Ms Word Format)

SOP for Collection Automation Project (CAP)

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Withholding Tax Performa for Field Offices