Withholding in Tax Ordinance

1
WITHHOLDING OF TAXES UNDER VARIOUS SUB -SECTIONS OF SECTION 50 OF

INCOME TAX ORDINANCE, 1979.
INDEX
S.No Subject Sub-Section Page No

1. Introduction. - 3-4
2. Deducting Authorities and relevant sub-sections. - 5-6
3. Salary and Perquisites. 50(1) 7
4. Interest on securities. 50(2) 8
5. Interest/profit by banking & financial institutions. 50(2A) 9
6. Banking transactions/cash deposit receipts and travellers 50(2B) 10

cheques etc.
7. General payments to non-residents. 50(3) 11
8. Payments to non-residents for technical services. 50(3A) 12
9. Payments for supply of goods, services rendered or 50(4) 13-16

contracts executed.
10. Brokerage or commission. 50(4A) 17
11. Import of goods. 50(5) 18
12. Export proceeds or indenting commission 50(5A) 19
13. Supply of goods to an exporter on back to back inland 50(5AA) 20

L/C.
14. Gain on exchange rate difference of wheat importers who 50(5AAA) 21

opened L.Cs. before 19-05-1999 and filed bills of entry
on or after 19-06-1999.
15. Bearer Certificates. 50(5B) 22
16. Motor Vehicles. 50(6) 23
17. Dividends. 50(6A) 24

2
18. Sale through public auction. 50(7A) 25

19. Rent of house property. 50(7B) 26
20. Construction of buildings. 50(7BB) 27
21. Prizes or winnings. 50(7C) 28
22. Profit or interest on bonds, certificates and other 50(7D) 29

instruments.
23. Electricity bills of commercial and industrial consumers. 50(7E) 30-31
24. Telephone bills & prepaid cards. 50(7F) 32
25. Gas bills of commercial & industrial consumers 50(7G) 33
26. Commission/discount of petrol pump operators 50(7H) 34
27. Required statements u/s 139 to 143A & penal action - 35-36
3
INTRODUCTION
The prime purpose of preparation of this booklet is to facilitate proper and

timely compliance by the Withholding Agents (Tax Deducting Authorities) on the one hand and the
taxpayers on the other. The user has to refer to the Index to find out the subject of withholding or the
title of sub-section, under which tax deduction is to be made, and easily know the position of
withholding responsibility or tax liability.
2. Withholding taxes have generally been in the nature of advance tax payments
and considered as an effective mechanism for income tax collection. Traditionally, these represented,
more or less, ad-hoc deduction at the point of accrual of income with subsequent adjustment at the time
of filing of returns of income from all sources. These were first introduced in late sixties. Since then
there has been growing emphasis on expanding the withholding tax net as a major source of income tax
collection. In 1979, there were only seven kinds of payments/transactions subject to withholding taxes,
which increased upto nineteen in 1994-95 and twenty five in 1999-2000 (including tax on bonus shares
which remains dormant).
3. The types of payments/transactions from various economic activities brought

into the withholding tax net, after the promulgation of the Income Tax Ordinance, 1979 are given in the
following table: -
S. No Section Type of payments/transactions Year of

Introduction
1 50(1) Salary and perquisites 1979
2 50(2) Interest on Securities. 1979
3 50(2A) Interest/Profit by banks and financial 1994

institutions.
4 50(2B) Banking transactions/cash deposit receipts, 1994

travellers cheques.
5 50(3) General payments to non-residents. 1979
6 50(3A) Payment to non-residents for technical 1987

services.
7 50(4) Payments for contracts/supply of 1979

goods/services rendered.
8 50(4A) Brokerage or commission. 1989
9 50(5) Import of goods. 1979
10 50(5A) Exports Proceeds. 1992
Indenting commission. 1999

4
11 50(5AA) Supply of goods to an exporter on back to back 1999

inland L/C.
12 50(5AAA) Income due to exchange rates difference on 1999
import of wheat
1995
13 50(5B) Bearer certificates
14 50(6) Public motor vehicles. 1979

Private Motor vehicles. 1992
15 50(6A) Dividends. 1989
16 50(7) Bonus Shares. 1979
17 50(7A) Sale through Public Auction 1981
18 50(7B) Rent for house property. 1989
19 50(7BB) Construction of buildings. 1993
20 50(7C) Prizes or winnings. 1990
21 50(7 D) Profit or interest on bonds, certificates and 1991

other instruments.
22 50(7 E) Electricity bills of commercial and industrial 1992

consumers.
23 50(7F) Telephone bills and prepaid cards. 1996
24 50(7G) Gas bills of commercial & industrial 1999

consumers.
25 50(7H) Commission/discount of petrol pump operators 1999
4. Withholding Agent or Tax Deducting Authority is usually the person

responsible to withhold tax at source. This is normally the principal officer or the officer in charge of
disbursement of funds in a company or registered firm or Government and Local Authority.
5. Although every effort has been made to provide the basic information regarding
withholding taxes, which is simple and understandable, there may be situations where elaborate
information is required. In such cases the user is advised to contact the nearest Income Tax Office or the
Director General, Tax Withholding, Central Board of Revenue, (Direct Taxes Wing) Islamabad to clear
the concept.
5
DEDUCTING AUTHORITIES/AGENTS AND RELEVANT SUB-SECTIONS
For the convenience of the users, an illustrative list of authorities, alongwith the
relevant sub-sections with which they are usually concerned, is given below against their names.
However, the list is not exhaustive, as some other authorities are also required to act under section 50.
Similarly, various other sub-sections, not enumerated below, might also be attracted. It is advised that
the users must go through the whole of this publication for proper guidance and knowledge.
S. TAX DEDUCTING AUTH ORITIES RELEVANT SUB-SECTIONS

No.
1. Individuals AOP, URF, HUF 50(1), 50(3), 50(3A).
2. Banks 50(1), 50(2), 50(2A), 50(2B),

50(3), 50(3A), 50(4), 50(4A),
50(5B), 50(7A), 50(7B), 50(7C),
50(7D).
3. Registered Firms with paid up capital of Rs. 1.0 50(1), 50(3), 50(3A), 50(4),
million and above. 50(4A), 50(7B).
50(1), 50(3), 50(3A), 50(4A),

Registered Firms with paid up capital of less than 1
4. 50(7B).
million
50(1), 50(2), 50(2A), 50(2B),

5. Financial Institutions
50(4), 50(5B).
Federal & Provincial Governments, their allied 50(1), 50(2), 50(40, 50(4A),
6. Departments and Corporations. 50(5B), 50(7A), 50(7B).
50(1), 50(2), 50(2A), 50(2B),

50(3), 50(3A), 50(4), 50(4A),
7. All Companies
50(5A), 50(5B), 50(6A), 50(7),
50(7A), 50(7B), 50(7D)
50(1), 50(2), 50(3), 50(3A), 50(4),

8. Local Authorities. 50(4A), 50(7A), 50(7B), 50(7BB),
50(7D).
50(1), 50(3), 50(3A), 50(4),

9. Finance Societies. 50(4A), 50(5B), 50(7D).
6
10. Provincial Excise & Taxation Deptt. 50(6), 50(7B).
11. Postal Department 50(1), 50(6), 50(7B).
50(1), 50(4), 50(7A), 50(7B),

12. Development Authorities
50(7BB)
13. Customs Authorities 50(5), 50(5AAA).
14. Foreign Exchange Dealers/ Bank Branches 50(5A), 50(5AA).
Persons preparing bills of telephones / issuing

15. 50(7F).
prepaid telephone cards
Persons preparing bills for electricity consumption in

16. respect of an industrial or commercial consumer 50(7E).
17. Diplomatic/Foreign Missions. 50(1), 50(3), 50(3A), 50(7B).
50(1), 50(3), 50(3A), 50(4),

18. Foreign Contractors, Consortium & Associations.
50(4A) 50(7A).
50(1), 50(3), 50(3A), 50(4),

19. Foreign Consultants.
50(7A)
Persons preparing gas bills of commercial &

20. 50(7G).
industrial consumers.
Persons selling petroleum products to petrol pump

21. 50(7H).
operators
Non-governmental charitable institution, a private

22. educational institution, a hospital, a clinic and a 50(7B)
maternity home.
7
SALARY AND PERQUISITES
Section : 50(1)
Nature of payment/transaction : Salary including allowances and perquisites

etc.
Responsibility for tax deduction : All employers.
Circumstances requiring deduction : Where payment of annual salary exceeds the

exemption limit.
Taxability : Adjustable
TAX DEDUCTION RATE EXEMPTION LIMIT
i) RESIDENTS
Tax as per First Schedule -Rs.50,000/-

calculated on estimated salary
income of the financial year
divided by 12 months to arrive -For Working Women
at the amount of monthly excluding director
deduction. of a company). -Rs.60,000/-
ii) NON RESIDENTS
At the rate applicable to NIL

residents or @ 30% of total
income, whichever is higher.
Prescribed period for payments of tax deducted to the credit of the Federal Government.
i) On the same day by the government departments, under rule 49.
ii) Within one week by others (except where quarterly payments are allowed by the Deputy
Commissioner of Income Tax), under rule 50.
In case of delay or default additional tax is chargeable @ 24% per annum.

8
INTEREST ON SECURITIES
Section : 50(2)
Nature of payment/transaction : Interest on securities (excluding interest on

tax-free securities of Federal & Provincial
Governments and on US Dollar Bonds).
Responsibility for tax deduction : Payers of interest.
Circumstances requiring deduction : At the time of payment of interest.

i) ALL RESIDENTS
a) General rate 30% NIL
b) Special Rates
On FIBs, reinvestment
of KDCs and redeposit
of KD accounts, and schemes 10% NIL
of National Savings
ii) NON RESIDENTS 30% NIL
Exemption
The receipts arising in the accounts of the special purpose vehicle for the purpose of securitization till
the process of securitization.
Prescribed Period for payment of tax deducted to the credit of the Federal Government.
i) On the same day by Government departments, under rule 49.
ii) Within one week of tax deduction, by others under rule 50.

9
INTEREST/PROFT BY BANKING AND FINANCIAL INSTITUTIONS
Section : 50(2A)
Nature of payment/transaction : Interest or profit on an account maintained with any bank

or financial institution.
Responsibility for tax deduction: Payers of such interest or profit.
Circumstances requiring deduction: At the time, credit is made to the account of recipient or
at the time of payment thereof, whichever is earlier.
Exemption limit : NIL
TAX DEDUCTION RATE TAXABILITY
10% of gross amount before -Final discharge of

zakat deduction. tax liability u/s
80B for individuals,
URFs, AOPs & HUFs.
-Adjustable for others.
RECIPIENTS EXEMPT FROM TAX DEDUCTION
i) Federal Government, Provincial Governments and Local Authorities.

ii) Eligible persons deriving interest income or profit from foreign currency accounts held with
the authorized banks in Pakistan in accordance with the Foreign Currency Accounts Scheme
introduced by the State Bank of Pakistan.
iii) Citizens of Pakistan residing abroad deriving interest or profit from a rupee account held
with a scheduled bank in Pakistan, where deposits in the said account are exclusively from
foreign exchange remitted in the said account.
iv) Resident citizens of Pakistan deriving income from a private foreign currency account held
with an authorized bank in accordance with the Foreign Currency Account Scheme
introduced by the State Bank of Pakistan.
v) Foreign banks earning interest on approved rupee accounts maintained with Pakistani bank
in accordance with Clause (79) of Second Schedule.
vi) Banking company-receiving interest on inter-bank deposits from another banking company.
vii) Persons who produce certificate from the Commissioner of Income Tax that the
recipient's income during the said income year is exempt from tax.
viii) The receipts arising in the accounts of the special purpose vehicle for the purpose of
securitization till the process of securitization.
Prescribed period for payment of tax deducted to the credit of the Federal Government.
Within one week of tax deduction, under rule 50.

10
BANKING TRANSCATIONS / CASH DEPOSIT RECEIPTS

AND TRAVELLER CHEQUES ETC.
Section : 50(2B)
Nature of payment/transaction : -Clearance of an out -station

cheque exceeding Rs.25,000/-.
-Issuance of demand draft or pay
order or special deposit receipt,
cash deposit receipt, telegraphic,
telephonic or electronic transfer
or rupee traveller cheques.
Responsibility for tax deduction : Persons:

-Clearing such cheques.
-Issuing such instruments.
-Effecting transfer of funds.
Circumstances requiring : At the time of:

deduction - Clearance of outstation
cheques.
- Issuance of Demand Draft,
Pay order, SDR, TT & CDR.
- Transfer of funds.
0.30% of the amount Adjustable
PERSONS EXEMPT
i) Federal and Provincial Governments and their departments.
ii) Statutory bodies.
iii) Universities.
iv) Approved charitable institutions.
v) Industrial undertakings and institutions exempt under the Second Schedule to the Income
Tax Ordinance, 1979.
vi) Listed public limited companies.
vii) Foreign diplomats and foreign diplomatic missions in Pakistan.
viii) Intra-company financial transactions i.e. between branches and offices of the same
company.
ix) A drawer who furnishes a specified statement, interalia, showing payer's N.T.N.
- Within one week of tax deduction, under rule 50.
In case of delay and default additional tax is chargeable @ 24% per annum.
11
GENERAL PAYMENTS TO NON-RESIDENTS
Section : 50(3), 50(3.1), 50(3.2), 50(3.3)
Nature of payment/transaction : Payment to a non-resident towards any income

chargeable under the Income Tax Ordinance, other than
payments to which sections 50(1), 50(2), 50(2A),
50(3A), 50(4), 50(4A), 50(6A), 50(7C), and 50(7D)
apply.
Responsibility for tax deduction: Persons paying to a non-resident.
Circumstances requiring
deduction : At the time of making payments to non-residents.
i) 15% in case of payments on Final
account of royalty.
ii) 7.5% upon dividend paid to a

non- resident company by a
company engaged in mining Adjustable
operations other than
petroleum.
iii) In any other case:

30% of the sum chargeable or Adjustable
at the rate applicable to a
resident, whichever is higher.
Note
1. Section 50(3) does not apply to any payment made to a branch in Pakistan of a non-resident
banking company or an insurance company.
2. Where a person claims to be an agent of a non-resident he shall, before making any payment
to such non-resident, file a declaration to that effect with the concerned Deputy
Commissioner of Income Tax.
3. Where a person intends not to deduct tax from any payment other than: -
i) payment on account of imports of goods where title of ownership is transferred
outside Pakistan ; or
ii) payment on account of educational and medical expenses remitted in accordance
with the regulations of State Bank of Pakistan, for the reason that it is not
chargeable to tax under this Ordinance, he shall furnish the particulars of such
non-resident and the nature and quantum of such payment to the Deputy
Commissioner at the time of making the payment.
4. Notwithstanding anything contained in sub-section (3.2), the Deputy Commissioner may,

where he has reason to believe that the payment is charge able to tax under this Ordinance, direct the
person making the payment to deduct tax from such payment at the rates specified in the First Schedule
or such lower rate as he may by an order in writing, specify.
i) On the same day, by the government departments, under rule 49.
ii) Within one week of tax deduction, by others, under rule 50.
12
PAYMENTS TO NON-RESIDENTS FOR TECHNICAL SERVICES
Section : 50(3A)
Nature of payment/transaction : Payment on account of fee for technical

services to a non-resident.
Responsibility for tax deduction : Person paying such fee.
Circumstances requiring deduction : In case of such payments except where the

person paying the amount is himself liable
to pay tax thereon as an agent of the non-
resident.
Taxability : Final discharge of liability u/s 80AA
15% of the amount NIL

Reduction in rate of tax deduction.
Where the Deputy Commissioner of Income Tax issues a certificate that the recipient is liable to pay tax
at a rate which is lower than 15% under a treaty or convention for avoidance of double taxation, the tax
shall be deducted at such lower rate.
Institution exempt from tax deduction.
The Agha Khan Hospital and Medical College.
i) On the same day, by the government department, under rule 49.

13
PAYMENTS FOR SUPPLY OF GOODS, SERVICES RENDERED OR

CONTRACTS EXECUTED
Section : 50(4)
Nature of payment/transaction : Payment including advance for supply of

goods, services rendered or contracts.
Responsibility for tax deduction : Person making payment on behalf of: -
- Government.
- Local authority.
- Company.
- Registered Firm with capital of Rs. 1.0
million and above.
- Foreign contractor, consultant and
consortium.
Circumstances requiring deduction : At the time of making payment to suppliers,
contractors or professionals.
Exemption Limit : -For supply of goods.: Rs.25,000/-
: -For services rendered.:Rs.10,000/-
: -For execution of contracts:Rs.10,000/-
i) RESIDENTS
a) Supply of goods:
- General rate 3.5% -Final discharge of liability
u/s 80C for persons other
than manufacturers,
- For manufacturers on exercising of option
(see note 5 below).
- Supply of rice, cotton
cotton seed and edible
oil. 1.5% - Final discharge of liability u/s 80C for
persons other than manufacturers.
- For manufacturers on exercising of option
(see note 5)
b) Special rates specified by CBR.

- Payments on account 1% Final discharge of
of supply of raw hides liability u/s 80C.
and skins.
of supply of cotton lint liability u/s 80C.
of supply of raw wool. liability u/s 80C.
- Payments on account of 1% Final discharge of
Morabaha transactions liability u/s 80C.
made by a modaraba or an
investment bank.
- Payments on account 2% Adjustable
of transportation of
goods through goods
transport vehicles.
14
c) Services rendered 5% Final discharge, except for

doctors, lawyers, accountants,
auditors, architects, surveyors,
actuaries, engineers, advisors
& consultants.
d) Contract payments
Residents
- Execution of contracts
(other than contracts
for supply of goods
& services):-
Where the value of 5% Final discharge of

contract does not liability u/s 80C.
exceed thirty million
rupees.
Where the value of 6% Final discharge of
contract exceeds liability u/s 80C.
thirty million rupees.
ii) Non-residents.
- Execution of turn-key Final discharge of
contracts. 8% liability u/s 80C.
- Execution of contract s
or sub-contracts for
designing, supply of
plant and equipment
and construction of
power projects other
than hydel power
projects and trans- Final discharge of
mission line projects. 4% liability u/s 80C.
Execution of contract or
sub-contracts for design -
ing, supply of plant and
equipment and construction Final discharge of
of hydel power projects 5% liability u/s 80C.
- execution of contract
other than contracts
for supply of goods
and services.
Where the value of
contract does not
exceed thirty million
rupees. 5% Final discharge of
liability u/s 80C.
15
Where the value of

contract exceeds
thirty million
rupees. 6% Final discharge of
liability u/s 80C.
RECIPIENTS EXEMPT FROM TAX DEDUCTION.

i) Provincial Governments
ii) Local Authorities
iii) Persons who are residents of the Tribal Areas or Azad Kashmir and execute contracts in
Tribal Areas or Azad Kashmir only, as the case may be, and produce a certificate to this
effect from the Political Agent concerned or the district authority, as the case may be, or in
the case of Azad Kashmir, from the Income Tax Officer concerned.
iv) Persons who produce a certificate from the Commissioner of Income Tax that their income
during the income year is exempt from tax.
v) Persons receiving payments from a company exclusively for the supply of agricultural
produce which has not been subjected to any process other than that which is ordinarily
performed to render such produce fit to be taken to market.
vi) Companies receiving payments for the supply of electricity and gas.
vii) Companies receiving payments for the supply of crude oil.
viii) Attock Refinery Limited, National Refinery Limited and Pakistan Refinery Limited
receiving payments for the supply of their products.
ix) Pakistan State Oil Company Limited, Shell Pakistan Limited, Caltex Oil (Pak) Limited
receiving payments for the supply of petroleum products.
x) Shipping companies and air carriers receiving payments for the supply of
passenger tickets and for the cargo charges of goods transported.
xi) Hotels and restaurants receiving payments in cash for providing accommodation or food or
both, as the case may be.
xii) Persons receiving payments for supply of cotton seed.
xiii) Manufacturers who produce certificate from the Commissioner of Income Tax that their
income during the income year is not likely to be chargeable to tax due to assessed losses
carried forward.
xiv) Persons, other than those whose income is liable to tax under section 80C, who produce
certificate from the Commissioner of Income Tax that their income during the income year
is not likely to be chargeable to tax due to assessed losses carried forward.
xv) Persons, other than those whose income is liable to tax under section 80B or 80C, from
whom tax has been deducted under sub-section (4) of section 50 and the aggregate of the
deducted tax under the sub-section is equal to or exceeds the tax payable under section 53 in
respect of that income year and a certificate to that effect from the Commissioner of Income
Tax is produced by such persons.
16
NOTES:
1) Deductions are not required to be made in respect of persons receiving payments not
exceeding Rs. 25,000/- in case of supply of goods and Rs.10,000/- in case of services
rendered or execution of contract, in a financial year. However, if such payments exceed the
above monetary limits during a financial year then tax shall also be deductible on all such
payments made earlier dur ing the same financial year, from which no deduction of tax was
made.
2) DEFINITION OF SUPPLY
"Supply of goods" includes both cash and credit purchases of goods by the payer, whether
under a contract or not, on credit or in cash.
3) PAYING AUTHORITIES EXEMPT FROM TAX DEDUCTION

AS PER CBR CIRCULAR NO. 26 DATED AUGUST 24, 1991
Exporters making payments on account of supply of goods produced for export sales except
where payments are in respect of supplies of cotton lint, raw wool, rice, cotton seed oil, raw
hides and skins or any other goods in respect of which special rates of tax deduction have
been specified by the CBR. In case local sales constitute only 5% of export sales, non-
deduction of tax in respect of goods not exported, would not make an exporter liable to pay
the withholding tax.
4) LEASE BACK TRANSACTIONS
Payments against purchase of asset under lease and buy back agreement by modaraba or
leasing company shall not be subject to withholding tax under this sub-section.
5) AS PER CBR CIRCULAR 11 OF 1998:
With effect from July 01, 1998 manufacturers who opt for the presumptive tax regime must
file the declaration of their option within three months of the commencement of the income
year. Such declaration would be valid and also irrevocable for three years.
6) Persons who are manufacturer cum exporters are exempt from the obligation u/s 50(4) of tax
withholding.
i) Same day, by government departments, under rule 49.
17
BROKERAGE OR COMMISSION
Section :
50(4A)
Nature of payment/transaction : Payment of brokerage or commission

including advance.
Responsibility for tax deduction : Persons making payment on behalf of:

- Government
- Local authority
- Company
- Registered Firm
- Foreign contractor or consortium.
Circumstances requiring : At the time of payment
deduction
Taxability : Final
10% of the amount of brokerage NIL

or commission.
i) On the same day by Government departments, under rule 49.

18
IMPORT OF GOODS
Section : 50(5)
Nature of payment/transaction : Import of goods.
Responsibility for tax collection : Collector of Customs.
collection : Clearance of imported goods.
TAX COLLECTION RATE TAXABILITY
5% of import value, except -Final discharge of liability u/s 80C

import of edible oils by for commercial importers.
manufacturer for his own use -Minimum/adjustable for industrial
where it is 2%. undertakings importing edible oils as raw
material
IMPORTERS EXEMPT FROM TAX PAYMENTS.

i) Provincial Governments and Local Authorities.
ii) Foreign companies and other associations whose share capital is substantially held by a
foreign government.
iii) Importers of plant, machinery, fixture, fittings or any other equipment for setting up
approved industrial undertaking (including hotel).
iv) Importers of plant or machinery for execution of government contract.
v) Importers, other t han commercial importers, who produce certificate from the concerned
Commissioner of Income Tax that their income during the income year is not likely to be
chargeable to tax.
vi) Companies importing high -speed diesel oil, light diesel oil, high octane blending compound
or kerosene oil.
vii) Companies importing crude oil for refining and chemicals used in refining.
viii) (a) Any person re-importing re-useable containers for re-export, qualifying for
Customs and Sales Tax exemption on temporary import under Customs
Notification SRO 344(I)/95 dated 25th April 1995; or
(b) Any person importing Motor Spirit, Furnace Oil, J P -I and MTBE.
ix) One CBU bus imported under the NRI scheme.
x) Motor cars imported under a scheme of fixed Customss duty made under the Finance Act,
1999.
Reduced Rate Certificate.
The Regional Commissioner of Income Tax is authorized to issue certificate for reduction of
rate up to 100% in case of import of raw materials by a manufacturer exclusively for its own
use.
- Same day of tax collection, under rule 49.

19
EXPORT PROCEEDS OR INDENTING COMMISSION
Section : 50(5A)
Nature of payment/transaction : Proceeds from export sales or on account of

indenting commission..
Responsibility for tax deduction : Any person being authorized dealer in

foreign exchange.
Circumstances requiring deduction : Realization of foreign exchange proceeds on

export of goods or indenting commission..
Taxability : Final discharge u/s 80CC.
NATURE OF PROCEEDS TAX DEUCTION RATE
1. Where the income pertains to

exports covered under:
a) Part I of the Eight Schedule to the
Income Tax Ordinance, 1979. 0.50% of such income
b) Part II of the above mentioned Schedule. 0.75% of such income
c) Part III of the above Schedule. 1.00% of such income
2. Where the income pertains to indenting commission. 10% of such proceeds

i) Exporters who produce a certificate from the Commissioner of Income Tax that their
income during the income year is exempt from tax.
ii) Cotton Export Corporation of Pakistan Limited.
Prescribed period for payment of tax deducted to the credit of the Fede ral Government.
- Within one week of tax deducted, under rule 50.

In case of default or delay additional tax is chargeable @ 24% per annum.
20
SUPPLY OF GOODS TO AN EXPORTER ON BACK TO BACK INLAND L/C
Section : 50(5AA)
Nature of payment/transaction : Realization of proceeds on account of supply

of goods to an exporter on back to back
inland letter of credit.
Responsibility for tax deduction : Any person being authorised dealer in

foreign exchange.
Circumstances requiring : At the time of making such payments.

deduction
Taxability : Final discharge u/s 80CC.
NATURE OF PROCEEDS TAX DEUCTION RATE
Where the income pertains to

supply of goods
covered under:
a) Part I of the Eight Schedule to the 0.50% of such income

Income Tax Ordinance, 1979.
b) Part II of the above mentioned Schedule. 0.75% of such income
c) Part III of the above Schedule. 1.00% of such income
- Within seven days of tax deducted, under rule 50.

In case of default or delay additional tax is chargeable @ 24% per annum.
21
GAIN ON EXCHANGE RATE DIFFERENCE Of WHEAT IMPORTERS WHO OPENED L.Cs

BEFORE 19-05-1999 AND FILED BILLS OF ENTRY ON OR AFTER 19-06-1999
Section : 50(5AAA)
Nature of payment/transaction : Difference in the exchange rate on the date of

filing of bill of entry and the rate on which
payment in foreign exchange was made or
foreign exchange was booked .for import of
wheat of the importers who opened L/C on
or before 19-05-1999.
Responsibility for tax collection : Collector of Customs.
Circumstances requiring collection : At the time of clearance of imports (effective

from 12-06-1999).

90% of such difference. -Final discharge of liability u/s 80C

This is in addition to tax collectable
U/s 50(5)
- Same day of tax collection, under rule 49.
22
BEARER CERTIFICATES
Section : 50(5B)
Nature of payment/transaction : Encashment of bearer certificates (whether in

rupees or foreign currency), purchased on or
after 15 June, 1995, issued by or on behalf of
the government, banking company, financial
institution or any company or body corporate,
any local authority or any finance society.
Responsibility for tax deduction : Any person responsible for encashment of

bearer certificates.
deduction : Upon encashment.

Foreign Exchange Bearer
certificates. (F.E.B.Cs). 1% Final discharge of liability u/s 80-B for
assessees other than registered firms and
companies.
Bearer certificates 2% Final discharge of liability u/s 80- B

other than F.E.B.Cs. for assessees other than registered
firms and companies.
Within one week of tax deduction, under rule 50.

23
MOTOR VEHICLES
Section : 50(6)
Nature of payment/transaction : Tax on motor vehicle.
Responsibility for tax collection : Person collecting motor vehicle tax.
Circumstances requiring Collection : At the time of collection of motor vehicle

tax.
Taxability : Adjustable.
LADEN WEIGHT RATE OF TAX COLLECTION

I) Goods transport vehicles with
registered laden weight of:
a) Less than 2030 Kgs. Rs. 1,200/- per annum
b) 2030 Kgs or more but less
than 8120 Kgs. Rs. 7,200/- per annum
c) 8120 Kgs or more but less
than 15000 Kgs. Rs. 12,000/- per annum
d) 15000 Kgs or more but less
than 30,000 Kgs. Rs. 18,000/- per annum
e) 30000 Kgs or more but less
f) 45000 Kgs or more but less
g) 60000 Kgs or more Rs. 36,000/- per annum
II) Passengers transport vehicles

plying for hire with registered
seating capacity of:
a) 4 or more persons but less
than 10 persons Rs. 25/- per seat per annum
b) 10 or more persons but less
than 20 persons Rs. 60/- per seat per annum
c) 20 persons or more. Rs. 100/- per seat per annum
III) Private motor cars with engine

capacity exceeding
a) 1000CC and upto 1199CC Rs. 500/- per annum
b) 1200CC and upto 1299CC Rs. 750/- per annum
c) 1300CC and upto 1599CC Rs.1,500/- per annum
d) 1600CC and upto 1999CC Rs.2,000/- per annum
e) 2000CC or more Rs.3,000/- per annum
Persons Exempt From Tax Deduction.
1. Goods transport for vehicles falling under the category at Para I(b) above after ten years for
the date of first registration.
2. Persons who produce a certificate from the Commissioner of Income Tax that
their income is exempt from income tax.
- On the same day of tax collection, under rule 49.
24
DIVIDENDS
Section : 50(6A)
Nature of payment/transaction : Payment of dividend.
Responsibility for tax deduction : Principal officer of the company.
Circumstances requiring : Payment of dividends by a

deduction company to a person other than a company.
- 10% of the gross amount of the Final discharge of tax liability u/s
dividend paid to a shareholder 80B for individuals, un-registered
(not being a company). Firms, Association of persons, HUFs and
artificial juridical persons.
Persons who produce a certificate from Commissioner of Income Tax that the recipient's income during
the income year is exempt from tax.
Prescribed period for payment of tax deducted to the credit of the Federal Gove rnment.
- Within one week of tax deduction, under rule 50.

25
SALE THROUGH PUBLIC AUCTION
Section : 50(7A)
Nature of payment/transaction : Sale of property including lease of right, to

collect octroi duties, toll, fees and other
levies, by whatever name called, through
public auction.
Responsibility for tax collection : Person selling property by public auction or

through tenders belonging to:
- Government
- Local authority
- Public company
- Foreign association declared to be a
company.
- Foreign contractor or consultant or
consortium.
Circumstances requiring collection : Upon sale of property through auction.

- 5% of sale price of property consisting Final discharge of
of lease of right to collect octroi, duties, liability u/s 80C
toll, fees or other levies, by whatever
name called.
- 3% in other cases Adjustable
i) By Government departments, on the same day, under rule 49.
ii) By others, within one week of tax deduction, under rule 50.
26
RENT OF HOUSE PROPERTY
Section : 50(7B)
Nature of payment/transaction : Payment (including advance) for rent of

house property (including rent of furniture,
fixtures and services).
Responsibility for tax deduction : Person making payment on behalf of:

- Government
- Local authority
- Company or trust
- Diplomatic mission of a foreign state.
- Non-governmental charitable
institution, private educational institution,
hospital, clinic and maternity home.
Circumstances requiring deduction : Payment of rent of house property including

advance rent & rent of furniture, fixture and
services.
7.5% of the amount Rs.100,000/-
RECIPIENTS EXEMPT FROM TAX DEDUCTION

i) Person who produces certificate from Inspecting Additional Commissioner of Income Tax
that the recipient's income during the year is exempt from tax.
ii) Person who produces a certificate from Inspecting Additional Commissioner of Income Tax
that the recipient's income during the income year is not likely to exceed the minimum
amount not chargeable to tax.
i) On the same day of deduction, by Government departments under rule 49.
27
CONSTRUCTION OF BUILDINGS
Section : 50(7BB)
Nature of payment/transaction : Construction of building other than

residential house.
Responsibility for tax collection : Authority approving building plan and

issuing completion certificate.
Circumstances requiring collection : In two equal installments. At the time of

approval of building plan and at the time of
issuance of completion certificate.
STAGE TAX COLLECTION RATE

- At the time of approval of Plan 1%
- At the time of issua nce of

completion Certificate 1%
Note: The provision under this section are attracted to the buildings other than residential house
located on plots exceeding 500 sq. yds. in Islamabad, Lahore and Karachi and exceeding
1000 sq.yds. at other places.
OWNERS OF BUILDING EXEMPT FROM TAX COLLECTION
i) Government Department.
ii) Agencies and offices of the Government the income of which is not liable to tax.
iii) Any institution, organization, foundation, society, board, trust or fund, which is not liable to
tax and certificate to that effect from Commissioner of Income Tax is produced.
i) By Government departments, on the same day of deduction, under rule 49.
ii) By others, within one week of tax collection, under rule 50.
28
PRIZES OR WINNINGS
Section : 50(7C)
Nature of payment/transaction : Prize money on prize bond, or winning from

a raffle, lottery or crossword puzzle.
Responsibility for tax deduction : Payer.
Circumstances requiring deduction : At the time of payment of prize.

10% of the value Final discharge of liability u/s 80-B for

payees other than registered firms and
companies.

29
PROFIT OR INTEREST ON BONDS, CERTIFICATES AND OTHER INSTRUMENTS
Section : 50(7D)
Nature of payment/transaction : Profit or interest on bonds, certificate,

debentures, securities, or instruments of any
kind issued by any banking or any other
company as defined in the Companies
Ordinance, 1984, or any body corporate or
any local authority or any finance society.
Responsibility for tax deduction : Person paying such profit or interest.
Circumstances requiring deduction : At the time of payment of such profit or

interest, not being a payment to which sub-
section (2) of section 50 applies.
10% of the gross amount. Final discharge of liability u/s 80-B for
assessees other than registered firms and
companies.
PROFIT OR INTEREST EXEMPT FROM TAX DEDUCTION.
i) Interest on securities subject to tax u/s. 50(2).

ii) Interest or profit by WAPDA on bonds issued before July 01, 1991.
iii) Profit of a charitable trust derived from the Federal Investment Bonds issued in pursuance of
Federal Investment Bonds Rules, 1990.
iv) Interest earned by recognized provident fund upon issuance of certificate by Deputy
Commissioner of Income Tax to the effect that either no tax is to be deducted or tax to be
deducted is at reduced rate.
v) Receipts arising in the accounts of the special purpose vehicles for the purpose of
securitization and till the time of securitization.
vi) Profit or interest on rated and listed Term finance Certificate issued on or after 17-09-1997.
Recipient Exempt From Tax Deduction.
The recipient who produces a certificate from the Commissioner of Income Tax that the
income of the recipient is exempt from tax.

30
ELECTRICITY BILLS OF COMMERCIAL & INDUSTRIAL CONSUMERS
Section : 50(7E)
Nature of payment/transaction : Electricity Bills of Commercial and

Industrial Consumers.
Responsibility for charging tax : Electricity supply company.
Circumstances requiring charge : At the time of preparing electricity

consumption bills in respect of any
industrial or commercial consumer.
AMOUNT OF BILL TAX RATE
i) Commercial Consumer
. Where electricity bill does not

exceed Rs. 400/- Rs. 60/-
exceeds but does not exceed
. Rs. 400/- Rs. 600/- Rs. 80/-

. Rs. 600/- Rs. 800/- Rs. 100/-
. Rs. 800/- Rs. 1,000/- Rs. 160/-
. Rs. 1,000/- Rs. 1,500/- Rs. 240/-
. Rs. 1,500/- Rs. 2,000/- Rs. 360/-
. Rs. 2,000/- Rs. 2,500/- Rs. 480/-
. Rs. 2,500/- Rs. 3,000/- Rs. 600/-
. Rs. 3,000/- - Rs. 720/-
ii) Industrial Consumer
Where electricity bill does not

exceed Rs. 500/- Rs. 30/-

. Rs. 500/- Rs. 750/- Rs. 40/-
. Rs. 750/- Rs. 1,000/- Rs. 50/-
. Rs. 1,000/- Rs. 1,500/- Rs. 80/-
. Rs. 1,500/- Rs. 2,000/- Rs. 120/-
. Rs. 2,000/- Rs. 3,000/- Rs. 180/-
. Rs. 3,000/- Rs. 4,000/- Rs. 240/-
. Rs. 4,000/- Rs. 5,000/- Rs. 300/-
. Rs. 5,000/- - Rs. 360/-
CONSUMERS EXEMPT.
31
i) Federal and Provincial Government Offices and other Government Agencies, Local
Authorities and Embassies.
ii) The consumer who produces a certificate from the Commissioner of Income Tax that the
income of the consumer is exempt from tax.
- Within one week of tax collection, under rule 50.

32
TELEPHONE BILLS AND PREPAID CARDS
Section : 50(7F)
Nature of payment/transaction : - PTCL telephone bills.

- Mobile telephone bills.
- Prepaid telephone cards for mobile
telephones.
Responsibility for charging tax : Telephone Company.
Circumstances requiring charge of tax : At the time of preparing telephone bills and
issuance (or sale) of prepaid phone cards.

In case of PTCL subscriber where the
monthly bill;-
Exceeds Rs.1,000 but does not exceed Rs.2,000/- Rs.50 per month
Exceeds Rs.5,000/- Rs.300 per month
In the case of mobile telephone subscriber,

where the monthly bill / sale price of prepaid
telephone cards;-
. -does not exceed Rs. 2,000/- Rs.125 per month
-exceeds Rs.2,000 but does not exceed 5000. Rs.250 per month
-exceeds Rs.5000 Rs.400 per month
Consumers Exempt.
- Government.
- Diplomats.
- Foreign missions.
- Non taxable charitable institutions.
- Internet service.
- The consumer who produces certificate from the Commissioner of Income Tax that the
income of the consumer is exempt.
- Within one week of the tax deduction, under rule 50.
33
GAS BILLS OF COMMERCIAL & INDUSTRIAL CONSUMERS.
Section : 50(7G)
Nature of payments/transaction : Gas bills of commercial or
Industrial consumers.
Responsibility for charging tax : Gas supply company.
Circumstances requiring charge of tax : At the time of preparing gas consumption
bills in respect of any industrial or
commercial consumer.
Commercial consumer
Where gas bill does not exceed Rs.2,500/- Nil

Rs. 2,500/- Rs. 4,000/- Rs. 150/-
Rs. 4,000/- Rs. 6,000/- Rs. 300/-
Rs. 6,000/- Rs. 7,500/- Rs. 400/-
Rs. 7,500/- Rs. 500/-
Industrial Consumer
Where gas bill does not Nil
exceed Rs. 2500/-
Rs. 2,500/- Rs. 5,000/- Rs. 250/-

Rs. 5,000/- Rs. 10,000/- Rs. 500/-
Rs. 10,000/- Rs. 20,000/- Rs. 1,000/-
Rs. 20,000/- Rs. 30,000/- Rs. 2,000/-
Rs. 30,000/- Rs. 3,000
Consumers exempt from tax
1. Federal and Provincial Government Offices, other

Government Agencies, Local Authorities and Embassies.
Within one week of the tax deduction, under rule 50.In case of delay or default additional tax is
chargeable @ 24% per annum.
34
COMMISSION / DISCOUNT OF PETROLPUMP OPERATORS
Section 50(7H)
Nature of payment/Transaction: Sale of petroleum products made by oil
marketing companies to petrol pump operators
on the value of their commission or discount
Responsibility for tax deduction Person responsible for making sale of petroleum
products.
Circumstances requiring deduction At the time of sale of petroleum

Products to petrol pump operators.
Taxability Full and final discharge of income tax liability of

petrol pump operators U/S 80 C
TAX RATE EXEMPTION LIMIT
10% of the amount of commission NIL

or discount received by the petrol
pump operators
Within one week of the tax deduction, under rule 50.

In case of delay or default additional tax is chargeable
@ 24% per annum.
35
REQUIRED STATEMENTS U/S. 139 TO 143-A & PENAL ACTION
Type of Section Statement Type of Due date of Penal action

payment/ prescribed statement filing under
transaction. under rule section 108
Salary 139 197/198 Annual/ 1 stSeptember/ Rs.2,000+
Monthly 15 th of each 200 for each
53 month day of
default.
(mandatory)
.
Interst on 141/141 200/57-A Annual/ 1 st September/ As above
securities Quarterly 15 July
15 October
15 January
15 April
Profit/Interest 141/141 200/57-A Annual/ As above
Quarterly
th
Financial 143 62B Monthly 10 of each As above
transaction. month
Payment non- 142 201 Annual 1 st September As above
resident
Payment to 142 58 Quarterly 15 th July As above
non-resident 15 th October
Payment of 15 th January
technical fee 15 th April
to non-
resident
T.FEE to 142 201 Annual 1 st September As above
non-resident
st
Supplies/Contr 142/142 201/61 Annual/ 1 September/ As above
a-cts/Services Monthly 15 th of each
month
Commission/ 141/141 200/61A Annual/ 1 st September/ As above.
Brokerage Monthly 15 th of each
month
Imports - 202 Quarterly 15 th July No penal
15 th October action
15 th January
15 th April
Exports + 143 201A Annual 1 st September Rs.2,000+
indenting 200 for day
commission of default.
(mandatory)
Supply of 142 201AA/ Monthly/ 25 th of each As above.
goods to an 201AA Annual month/
exporter on 1 st September
back to back every year
inland L/C
36
Bearer Provision No penal

certificate inserted action
vide
Finance
Act 1995,
Section,
rule &
statement
not
prescribed.
M. Vehicle 143 201B Annual 1 st September Rs.2,000+200

for day of
default.
(Mandatory)
Dividend 140-by 199/61B Annual/ 1 st September As above
domestic Annual
company/
140-by
every
company
Sale/Transfer 143A/ Rule not Annual/Q 15 th July As above
through 143A Prescribed uarterly 15 th October
auction /202B 15 th January
15 th April
Rent 141 61C Annual 1 st September As above
Building/Plan 143A/ Rule not Annual/ 1 st September As above

143A prescribed/ Quarterly 15 th July
201E 15 th October
15 th January
15 th April
Prize and 143 201C Annual 1 st September As above
Winning
Certificate 141 200 Annual 1 st September As above
/Debenture/
Bond
Electricity 143 201D Annual 1 st September As above
Telephone 143/143 201F/201F Monthly/ 25 th of every As above
Annually month/1 st
September
Gas 143 201G/ Annual/ 1 st September/ As above
201G Monthly 25 th of every
month
Petrol pump 143 200A Monthly 10 th of each As above
operation month
Property 143A(1) 202A Annual 1 st September As above
registration

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1

WITHHOLDING OF TAXES UNDER VARIOUS SUB -SECTIONS OF SECTION 50 OF

S.No Subject Sub-Section Page No

2. Deducting Authorities and relevant sub-sections. - 5-6

3. Salary and Perquisites. 50(1) 7

4. Interest on securities. 50(2) 8

5. Interest/profit by banking & financial institutions. 50(2A) 9

6. Banking transactions/cash deposit receipts and travellers 50(2B) 10

7. General payments to non-residents. 50(3) 11

8. Payments to non-residents for technical services. 50(3A) 12

9. Payments for supply of goods, services rendered or 50(4) 13-16

10. Brokerage or commission. 50(4A) 17

11. Import of goods. 50(5) 18

12. Export proceeds or indenting commission 50(5A) 19

13. Supply of goods to an exporter on back to back inland 50(5AA) 20

14. Gain on exchange rate difference of wheat importers who 50(5AAA) 21

15. Bearer Certificates. 50(5B) 22

16. Motor Vehicles. 50(6) 23

17. Dividends. 50(6A) 24

18. Sale through public auction. 50(7A) 25

20. Construction of buildings. 50(7BB) 27

21. Prizes or winnings. 50(7C) 28

22. Profit or interest on bonds, certificates and other 50(7D) 29

23. Electricity bills of commercial and industrial consumers. 50(7E) 30-31

24. Telephone bills & prepaid cards. 50(7F) 32

25. Gas bills of commercial & industrial consumers 50(7G) 33

26. Commission/discount of petrol pump operators 50(7H) 34

The prime purpose of preparation of this booklet is to facilitate proper and

3. The types of payments/transactions from various economic activities brought

S. No Section Type of payments/transactions Year of

2 50(2) Interest on Securities. 1979

3 50(2A) Interest/Profit by banks and financial 1994

4 50(2B) Banking transactions/cash deposit receipts, 1994

5 50(3) General payments to non-residents. 1979

6 50(3A) Payment to non-residents for technical 1987

7 50(4) Payments for contracts/supply of 1979

8 50(4A) Brokerage or commission. 1989

9 50(5) Import of goods. 1979

10 50(5A) Exports Proceeds. 1992

Indenting commission. 1999

11 50(5AA) Supply of goods to an exporter on back to back 1999

14 50(6) Public motor vehicles. 1979

15 50(6A) Dividends. 1989

16 50(7) Bonus Shares. 1979

17 50(7A) Sale through Public Auction 1981

18 50(7B) Rent for house property. 1989

19 50(7BB) Construction of buildings. 1993

20 50(7C) Prizes or winnings. 1990

21 50(7 D) Profit or interest on bonds, certificates and 1991

22 50(7 E) Electricity bills of commercial and industrial 1992

23 50(7F) Telephone bills and prepaid cards. 1996

24 50(7G) Gas bills of commercial & industrial 1999

25 50(7H) Commission/discount of petrol pump operators 1999

4. Withholding Agent or Tax Deducting Authority is usually the person

DEDUCTING AUTHORITIES/AGENTS AND RELEVANT SUB-SECTIONS

S. TAX DEDUCTING AUTH ORITIES RELEVANT SUB-SECTIONS

1. Individuals AOP, URF, HUF 50(1), 50(3), 50(3A).

2. Banks 50(1), 50(2), 50(2A), 50(2B),

50(1), 50(3), 50(3A), 50(4A),