What Section 153 covers
Section 153 of the Income Tax Ordinance, 2001 is one of the most frequently triggered withholding provisions in day-to-day business. It requires a "prescribed person," typically a company, an AOP above a certain threshold, or certain individuals, to deduct tax at source when making payments for:
- Section 153(1)(a): the sale of goods
- Section 153(1)(b): the rendering of services
- Section 153(1)(c): the execution of contracts
The withholding agent deducts the tax when paying the invoice, deposits it with FBR, and issues a withholding tax certificate to the recipient. Whether that deduction is later adjustable against the recipient's annual tax liability, treated as minimum tax, or treated as final tax depends on the specific category, which is why the treatment column below matters as much as the rate itself.
Why filer status changes everything
The single biggest driver of the applicable rate isn't the payment category. It's whether the recipient is on the Active Taxpayers List (ATL). Non-filer rates under the First Schedule to the Ordinance are generally double the filer rate on the same payment. That gap is exactly why maintaining ATL status (see our guide to the ATL surcharge) matters well beyond the return-filing exercise itself.
Rates for TY 2026-27 (Finance Act 2026)
The table below reflects the rates published in KPMG Taseer Hadi & Co.'s "Withholding Tax Collection Deduction, TY 2027" reference, itself based on the First Schedule to the Income Tax Ordinance, 2001 as amended by the Finance Act 2026. Several categories changed this year, so if you're working from an older rate card it's worth double-checking against this list.
Sale of goods, Section 153(1)(a)
| Category | Filer | Non-Filer | Treatment |
|---|---|---|---|
| Rice, cottonseed oil or edible oil | 1.5% | 3% | Minimum |
| Distributor of pharmaceutical products | 1% | 2% | Minimum |
| Distributor of cigarettes | 2.5% | 5% | Minimum |
| Gold, silver and articles thereof | 1% | 2% | Adjustable |
| General goods, recipient is a company | 5% | 10% | Minimum |
| General goods, recipient is an individual/AOP | 5.5% | 11% | Minimum |
Rendering of services, Section 153(1)(b)
| Category | Filer | Non-Filer | Treatment |
|---|---|---|---|
| Transport, freight, hotel, engineering, and similar listed services | 7% | 14% | Minimum |
| IT & IT-enabled services (ITeS) | 4% | 8% | Minimum |
| Independent professional services: doctors, lawyers, accountants, architects | 15% | 30% | Minimum (individuals only) |
| Electronic & print media advertisement | 1.5% | 3% | Minimum |
| Other/unlisted services | 14% | 28% | Minimum |
This is a summary of the more commonly used categories. Toll manufacturing, oil tanker contractors, exporter/export-house payments, NLC payments, contract execution, and e-commerce each have their own rates, all covered in full on our tax rate card.
A simple way to work out what to deduct
- Identify whether the payment is for goods (153(1)(a)), services (153(1)(b)), or a contract (153(1)(c)), and the specific sub-category if one applies.
- Confirm the recipient's filer or non-filer status on the FBR Active Taxpayers List at the time of payment, not from memory.
- Apply the confirmed rate to the gross invoice amount to arrive at the tax to deduct.
- Deposit the withheld amount with FBR by the 15th of the following month via a PSID generated through IRIS, and issue a withholding certificate to the recipient.
Common mistakes to avoid
- Assuming a recipient is a filer without checking the ATL on the date of payment, since status can change.
- Treating a minimum-tax deduction as fully adjustable when calculating year-end liability.
- Missing the 15th-of-the-month deposit deadline, which carries penalties and can create personal liability exposure for company officers.
- Applying last year's rate card without checking for in-year amendments via SRO, which happened again this year under the Finance Act 2026.