The Per-Vendor Withholding Tax Exemption Threshold: Rs 75,000 Goods, Rs 30,000 Services
Two thresholds, one important nuance
Section 153 of the Income Tax Ordinance 2001 sets per-vendor annual exemption thresholds for withholding tax. Below the threshold, no deduction is required; once crossed, withholding applies. The two headline figures are:
| Category | Per-vendor annual threshold |
|---|---|
| Supply of goods | Rs 75,000 |
| Services | Rs 30,000 |
These thresholds remain in force under the Finance Act 2026 (Federal Budget 2026-27), effective 1 July 2026.
The monthly-versus-annual aggregate trap
This is the point most companies get wrong in vendor withholding. Companies pay vendors monthly (or per invoice), but the exemption is an annual aggregate measured across the whole financial year per vendor. You don't test each payment on its own against the threshold. You test the running total of all payments to that vendor for the year.
Worked example: goods
- July: you pay a vendor Rs 20,000 for goods. Year-to-date total: Rs 20,000. Below Rs 75,000 so no deduction yet.
- August: another Rs 30,000. Year-to-date: Rs 50,000. Still below, so no deduction.
- September: another Rs 40,000. Year-to-date: Rs 90,000. The Rs 75,000 threshold is now crossed, so withholding applies and continues on every subsequent payment to that vendor for the rest of the year.
Notice that no single monthly payment exceeded Rs 75,000, yet withholding still applies because the annual aggregate did. Treating each invoice on its own would wrongly skip the deduction entirely.
Worked example: services
For services the same logic applies at a lower Rs 30,000 ceiling. Three monthly service payments of Rs 12,000 each total Rs 36,000. That is over the Rs 30,000 line, so withholding kicks in even though every individual payment looked small.
Why this matters for your tax position
If you fail to deduct where the annual aggregate required it, the FBR can disallow the related expense and impose default surcharge and penalties. Over-deducting, on the other hand, strains vendor relationships and cash flow. Getting the threshold right keeps your compliance record clean and your suppliers happy.
Tracking the aggregate automatically
The only reliable way to honour an annual aggregate is to keep a live, per-vendor running total. Zaffre Axon, from Zaffre Tech, does this for you. Zaffreaxon maintains a year-to-date balance for every vendor, automatically detects the payment that breaches Rs 75,000 (goods) or Rs 30,000 (services), and switches on withholding at the correct filer or non-filer rate from that point forward. Because the same Zaffre engine drives FBR slabs, EOBI and sales tax inside Zaffre HRM and across finance, your invoices and payroll share one consistent, centrally configured compliance core.
That means no month-end spreadsheet reconciliations and no missed thresholds. Zaffretech keeps the aggregate accurate.
References: Income Tax Ordinance 2001, Section 153; Finance Act 2026 (Federal Budget 2026-27); FBR withholding provisions.
Want to see per-vendor threshold tracking on your own vendor list? Book a demo of Zaffre Axon.