Written by Hamza Shahnawaz in Taxation Updated withholding tax rates under Section 152 apply to contracts, services, capital gains and other payments to non-residents from July 1, 2026. ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax withholding rates applicable to payments made to non-residents for Tax Year 2027, effective from July 1, 2026, under the updated Income Tax Ordinance, 2001. The revised rates, incorporated through amendments introduced by the Finance Act, 2026, apply to a range of payments covered under Section 152 of the Income Tax Ordinance, including contracts, services, capital gains and other specified transactions involving non-resident individuals and entities. Withholding tax rates on payments to non-residents According to the updated provisions, the following withholding tax rates will apply: Nature of Payment Tax Rate Payments under Section 152(1A) 7% of the gross amount payable Payments under Section 152(1AA) 5% of the gross amount paid Payments under Section 152(2) 20% of the gross amount paid Payments under Section 152(1AAA) 10% of the gross amount paid Capital gains under Sections 152(1D) and 152(1DA) 10% of the amount of capital gain Tax rates for contracts with non-residents The FBR has also prescribed separate withholding tax rates for payments under Section 152(2A)(a) relating to contracts with non-residents. Companies making such payments will be required to deduct tax at 5% of the gross amount payable, while all other taxpayers will be subject to a withholding tax rate of 5.5%. IT services receive concessional tax rate The updated law prescribes an 8% withholding tax on payments made for a broad range of services provided by non-residents, including transport, freight forwarding, air cargo, courier, manpower outsourcing, hotel,…