Withholding Tax on Supply of Goods (Section 153) Explained for Companies

What Section 153 covers

Under Section 153 of the Income Tax Ordinance 2001, certain buyers — known as withholding agents — must deduct tax at source when they pay for the supply of goods. Companies fall squarely within this net. When your business buys raw materials, finished goods, stationery, equipment or any other tangible supply from a vendor, you are generally required to deduct a slice of the payment and deposit it with the Federal Board of Revenue (FBR) on the vendor's behalf.

The Finance Act 2026 (Federal Budget 2026-27), effective 1 July 2026, keeps the core mechanics of Section 153 intact while rationalising surrounding measures. Understanding it correctly protects your company from disallowed expenses, penalties and default surcharges.

The filer rates on the supply of goods

Rates depend on whether the supplier is a company or an individual/Association of Persons (AOP), and on filer status. The figures below are the filer rates; suppliers not on the Active Taxpayers List (ATL) pay higher rates under the Tenth Schedule.

So if your company pays a corporate vendor Rs 1,000,000 for goods, you deduct Rs 50,000 (5%), pay the vendor Rs 950,000, and deposit Rs 50,000 to the FBR against that vendor's tax account.

The per-vendor exemption threshold

Section 153 carries a per-vendor annual exemption threshold of Rs 75,000 for the supply of goods. The crucial nuance: this is an annual aggregate, not a per-invoice limit. Once your total purchases from a single vendor cross Rs 75,000 in a financial year, withholding applies — and best practice is to apply it on the payment that breaches the threshold and on every payment thereafter.

Why companies trip up

• Treating each small invoice in isolation instead of tracking the running annual total per vendor.
• Forgetting to check ATL status, which changes the rate.
• Missing deposit deadlines, which triggers default surcharge and penalties.
• Failing to issue withholding certificates, leaving vendors unable to claim credit.

Filing and compliance obligations

Deducting is only half the job. Companies must deposit the tax within the prescribed timeline, file withholding statements with the FBR, and provide each vendor a certificate evidencing the deduction so the supplier can claim it against their own liability. Non-compliance can lead to the underlying expense being disallowed, inflating your taxable income.

How Zaffre Axon keeps you compliant

Manual tracking across hundreds of vendors and thousands of invoices is where errors creep in. Zaffre Axon, the platform from Zaffre Tech, auto-applies Section 153 withholding logic across invoices and finance. Configured centrally, Zaffreaxon tracks the running annual total per vendor, flags when the Rs 75,000 threshold is crossed, applies the correct filer or non-filer rate, and generates the deduction record — so your team never has to reconcile spreadsheets by hand. The same Zaffre engine that handles FBR salary slabs, EOBI and sales tax in Zaffre HRM extends to vendor withholding, keeping the whole company compliant from one place.

With Zaffretech handling the arithmetic and the audit trail, your finance team focuses on decisions, not deductions.

References: Income Tax Ordinance 2001, Section 153; Finance Act 2026 (Federal Budget 2026-27); FBR Active Taxpayers List and Tenth Schedule.

Ready to automate vendor withholding? Book a demo of Zaffre Axon today.