Budget 2026-27 — Withholding Tax Changes at a Glance
Withholding tax, summarised
Withholding tax touches almost every payment a business makes. The Finance Act 2026 (Federal Budget 2026-27) keeps the core §153 framework while rationalising service rates and raising small-trader thresholds. This guide brings the key numbers together in one place.
Core §153 rates (filer)
| Payment type | Company | Individual/AOP | Annual per-vendor threshold |
|---|---|---|---|
| Supply of goods | 5% | 5.5% | Rs 75,000 |
| Services (general) | 9% | 11% | Rs 30,000 |
| Contract execution | 7.5% | 8% | — |
Specified services and independent professionals are now separately categorised with rationalised rates, so check the category of each service before deducting.
Other key withholding rates
| Item | Filer rate |
|---|---|
| Dividend (150) | 15% (30% non-filer) |
| Profit on debt (151) | 15% |
| Property purchase (236K) | 1.5% |
| Property sale (236C) | 2.75% |
| Exports (154) | 1.25% |
The monthly-versus-annual nuance
This trips up many finance teams. Companies pay vendors monthly, but the per-vendor exemption is an annual aggregate. Once your total yearly purchases from one vendor cross Rs 75,000 (goods) or Rs 30,000 (services), withholding applies — including on earlier sub-threshold payments. Track cumulative vendor spend, not just the current invoice.
What changed this year
- Small-trader withholding-exemption turnover threshold raised from Rs 100M to Rs 200M.
- Reduced minimum tax for specified-sector distributors, dealers and wholesalers raised from 0.25% to 0.5%.
- Withholding scope enhanced for toll manufacturers and AOPs/individuals dealing with unregistered parties.
- The Tenth Schedule (enhanced non-filer rates) now also applies to capital gains on listed securities.
Filer status is the master switch
Every rate above is a filer rate; non-filers pay more under the Tenth Schedule. With banking and tax systems cross-matching high-value deposits and withdrawals, keeping vendors and yourself on the active taxpayer list is the single most effective compliance step.
How Zaffre keeps withholding correct
Cumulative thresholds, filer flags and service categories are exactly where manual systems fail. Zaffre Axon, from Zaffre Tech, tracks per-vendor annual spend, applies the right §153 category and switches filer logic automatically across invoices. Zaffre HRM keeps payroll withholding aligned, and Zaffretech and Zaffreaxon clients configure rates centrally to stay current with FBR.
References: Finance Act 2026 (Federal Budget 2026-27); Income Tax Ordinance 2001, sections 150, 151, 153, 154, 236C, 236K and Tenth Schedule; FBR.
Book a demo of Zaffre Axon to automate withholding across every payment.