Section 153 Withholding Tax — Goods, Services & Contracts

What Section 153 covers

Section 153 is divided into three core sub-sections, each with its own rate structure:

• 153(1)(a) — Supplies. Payment for sale of goods (rice, cotton seed, edible oils get a special low rate; everything else split between toll manufacturing and non-toll manufacturing, and between companies and other persons).
• 153(1)(b) — Services. Payment for rendering of services. Includes a reduced rate for IT and IT-enabled services, a special rate for advertising, and a default 15% / 30% for any service not otherwise listed.
• 153(1)(c) — Contracts. Payment on execution of a contract (other than for sale of goods or services). Different rates for sportspersons, companies, and any other case.
• 153(2) — Services to exporters. Reduced 1% / 2% rate for services rendered to exporters or export houses.
• 153(2A) — E-commerce. New rates for digitally ordered goods or services through e-commerce platforms — 1% via digital/banking channels, 2% for cash on delivery via courier service.

Section 153(1)(a) — Supplies in detail

The rate depends on three factors: who is supplying (company vs other), whether it's toll manufacturing, and whether it's a special-rate good (rice, cotton seed, edible oils).

• Rice, cotton seed, edible oils: 1.5% ATL / 3% Non-ATL — flat across all suppliers
• Companies, toll manufacturing: 9% ATL / 18% Non-ATL
• Companies, non-toll manufacturing: 5% ATL / 10% Non-ATL
• Other persons, toll manufacturing: 11% ATL / 22% Non-ATL
• Other persons, non-toll manufacturing: 5.5% ATL / 11% Non-ATL

Section 153(1)(b) — Services in detail

Services have multiple buckets, with significant differences between IT services (reduced rate) and other services (default rate).

• Certain services: 6% ATL / 12% Non-ATL
• IT and IT-enabled services (as defined in section 2): 4% ATL / 8% Non-ATL — Pakistan's preferential rate for the IT export sector
• Other services not in sub-para (i): 15% ATL / 30% Non-ATL — the default rate
• Print and electronic media advertising: 1.5% ATL / 3% Non-ATL — special low rate for the media sector

Section 153(1)(c) — Contracts in detail

• Sportspersons: 15% ATL / 30% Non-ATL
• Company: 7.5% ATL / 15% Non-ATL
• Any other case: 8% ATL / 16% Non-ATL

Section 153(2A) — Newly added e-commerce regime

Finance Act 2025 brought e-commerce squarely into Section 153. Payment for digitally-ordered goods or services through e-commerce platforms (including websites) is now subject to:

• 1% ATL / 2% Non-ATL — payments through digital means or banking channels via a payment intermediary
• 2% ATL / 4% Non-ATL — cash on delivery collected by a courier service

The intent is to capture the rapidly growing online retail and gig economy that previously slipped between section boundaries.

Who acts as the withholding agent?

Section 153 is triggered when a prescribed personmakes a payment to any other person. Prescribed persons include the Federal and Provincial governments, companies, AOPs with turnover above prescribed thresholds, and other categories listed in the Ordinance. If you're a small business making payment to a vendor and you fall under any of these definitions, you become the withholding agent — responsible for deducting the tax and depositing it with the FBR.

How withholding tax under Section 153 is treated

For most payees, Section 153 tax is adjustableagainst their final income tax liability. The deducted amount appears in the IRIS portal's Withholding Tax Credit statement and is claimed on the annual return. For some payees (notably persons opting for the final tax regime under specific clauses), it operates as final tax — meaning no further adjustment is possible and no return need be filed on that income.

Confirm the regime applicable to your specific transaction. You can verify statutory wording for any sub-section directly on the FBR official portal. The difference between adjustable and final tax materially changes your compliance and refund position.

Common Section 153 mistakes

• Wrong rate for company vs non-company. The rate sheet differentiates explicitly. Always confirm the legal status of the supplier before applying a rate.
• IT services misclassification. The 4% / 8% IT rate applies only to services meeting the specific Section 2 definition. Software development, IT-enabled BPO, cloud services typically qualify. Generic "consulting" usually does not.
• Forgetting Non-ATL doubling. Persons not on the ATL pay double the rate. Always check ATL status — see our NTN verification guide for the FBR portal lookup.
• Late deposits. Withholding agents must deposit deducted tax with the FBR within the prescribed time. Late deposit triggers default surcharge and penalty.

How Fair Tax International can help

Withholding tax compliance is one of the most error-prone areas of Pakistani tax. Our ACCA-led team handles full Section 153 compliance for businesses — vendor classification, rate application, monthly deposits, quarterly statements, and reconciliation against IRIS credits. Book a free consultation to review your current setup.

Section 153 withholding tax — frequently asked questions

What is Section 153 withholding tax in Pakistan?

Section 153 of Pakistan's Income Tax Ordinance, 2001 covers withholding tax on payments for supplies (goods), services, and contracts. Prescribed persons must deduct WHT at source on every qualifying payment and deposit it with the FBR. It is the most-used WHT section in Pakistan.

What is the Section 153 withholding tax rate on services?

Section 153(1)(b) charges 6% ATL / 12% Non-ATL on certain services, 4% ATL / 8% Non-ATL on IT and IT-enabled services, 1.5% ATL / 3% Non-ATL on advertising, and a default 15% / 30% on other services not covered elsewhere.

Is Section 153 withholding tax adjustable?

For most payees, Section 153 tax is adjustable against final income tax liability. The deducted amount appears in the IRIS portal Withholding Tax Credit statement and is claimed on the annual return. Some payees fall under the final tax regime — for them, no further adjustment applies.

Who is a prescribed person under Section 153?

Prescribed persons under Section 153 include the Federal and Provincial governments, companies, AOPs above prescribed turnover thresholds, and other categories listed in the Income Tax Ordinance. Once you fall within these definitions, you become responsible for deducting WHT on qualifying payments to vendors.

How are e-commerce sales taxed under Section 153 in Pakistan?

Section 153(2A), introduced under Finance Act 2025, charges 1% ATL / 2% Non-ATL on payments for digitally ordered goods or services made through digital or banking channels by a payment intermediary, and 2% ATL / 4% Non-ATL on cash on delivery collected by a courier service.