Written by Hamza Shahnawaz in Taxation Updated withholding tax rates under Section 153 apply to payments for goods, services, contracts and e-commerce transactions from July 1, 2026. ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax withholding rates applicable to payments for goods, services and contracts for Tax Year 2027, effective from July 1, 2026, following the issuance of the updated Income Tax Ordinance, 2001 incorporating amendments introduced through the Finance Act, 2026. The revised rates, prescribed under Section 153 of the Income Tax Ordinance, 2001, apply to a broad range of commercial transactions, including the sale of goods, provision of services, execution of contracts and payments made through e-commerce platforms. Withholding tax on payments for goods Under Section 153(1), the FBR has prescribed the following withholding tax rates on payments for goods: • Sale of rice, cotton seed oil and edible oils: 1.5% of the gross amount payable. • Sale of goods (other than toll manufacturing): o Companies: 5% of the gross amount payable. o Persons other than companies: 5.5% of the gross amount payable. • Toll manufacturing: o Companies: 9% of the gross amount payable. o Persons other than companies: 11% of the gross amount payable. Tax rates for services The updated law specifies different withholding tax rates depending on the nature of the service provided. A 7% withholding tax will apply to payments for a wide range of specified services, including transport, freight forwarding, air cargo, courier, manpower outsourcing, hotel, security guard, software development, engineering and architectural services, warehousing, telecommunication infrastructure (tower) services, car rental, building maintenance, oilfield services, telecommunication services, travel and tour services, REIT management services, inspection, certification, testing and training services, share registrar services, and data services licensed by the Pakistan Telecommunication Authority. The same rate also applies to services rendered by the Pakistan Stock Exchange Limited, the Pakistan Mercantile Exchange Limited and the National Clearing Company of…