Pakistanis make international payments every day — online shopping, travel bookings, software subscriptions, foreign education fees, and business tools. Whenever you pay abroad using a Pakistani credit, debit or prepaid card, the bank collects advance income tax on that payment under Section 236Y of the Income Tax Ordinance, 2001.
There's good news: the Finance Act 2026 has substantially reduced these rates. What used to cost you 5% (filer) or 10% (non-filer) on every international transaction is now just 0.5% and 1% respectively.
Key Point: Under the Finance Act 2026, Section 236Y advance tax is now 0.5% for filers and 1% for non-filers — down from 5% and 10%. And it remains an adjustable tax, not a final tax: every rupee deducted is credited against your annual liability when you file your return.
New Rates under the Finance Act 2026
The reduction in Section 236Y rates through the Finance Act 2026 is one of the most taxpayer-friendly changes for anyone who transacts internationally. Here is the before-and-after:
| Taxpayer Status | Previous Rate | New Rate (Finance Act 2026) | Reduction |
|---|---|---|---|
| Filer (on ATL) | 5% | 0.5% | 10x lower |
| Non-Filer (not on ATL) | 10% | 1% | 10x lower |
What this means in practice: On a PKR 100,000 international payment, a filer previously paid PKR 5,000 in advance tax. Today that same transaction costs just PKR 500. For frequent international spenders — freelancers, importers, students, travellers — this is a significant reduction in upfront cash outflow.
Note: The non-filer rate is still double the filer rate. The gap is smaller in absolute terms now, but the principle is unchanged — and non-filers still can't claim the tax back without filing a return.
What Is Section 236Y?
Section 236Y requires every bank or payment institution issuing or processing card payments to collect advance tax from the cardholder at the time an international payment is processed. It covers:
- Credit cards — Visa, MasterCard, UnionPay, American Express and others issued by Pakistani banks
- Debit cards — linked to Pakistani bank accounts, used for international online or point-of-sale transactions
- Prepaid cards — preloaded cards used for international payments
The tax applies to amounts paid or remitted abroad — any transaction where money flows out of Pakistan to a foreign merchant, service provider or platform. Domestic transactions on the same card are not covered.
When Is the Tax Collected?
The tax is collected by the bank at the time the international transaction is processed — in real time, not at month or year end:
- Paying for an international airline ticket online — deducted immediately
- An international streaming or software subscription — deducted at each billing cycle
- A foreign purchase on a prepaid card — deducted from the card balance at the time of the transaction
The deducted amount is deposited by the bank with FBR against your NTN or CNIC, and appears in your withholding tax ledger on IRIS — ready to be credited when you file your annual return.
Worked Examples
Example 1 — Filer making an international payment
Mr. Usman is on the ATL. He books an international hotel for PKR 100,000 using his Pakistani debit card.
| Item | Amount (PKR) |
|---|---|
| International payment | 100,000 |
| Status | Filer — on ATL |
| Rate (Section 236Y) | 0.5% |
| Advance tax deducted | 500 |
| Total charged to account | 100,500 |
The PKR 500 is deposited with FBR and credited against Mr. Usman's annual tax liability when he files his return. Under the old 5% rate, this same booking would have cost him PKR 5,000 in advance tax.
Example 2 — Non-filer making an international payment
Ms. Sara is not on the ATL. She buys software online for PKR 100,000 using her Pakistani credit card.
| Item | Amount (PKR) |
|---|---|
| International payment | 100,000 |
| Status | Non-Filer — not on ATL |
| Rate (Section 236Y) | 1% |
| Advance tax deducted | 1,000 |
| Total charged to account | 101,000 |
Ms. Sara pays PKR 500 more than Mr. Usman for the identical transaction — and because she doesn't file a return, she can't claim that PKR 1,000 back at all.
Annual impact — frequent international spender
| Annual international spend | Filer @ 0.5% | Non-Filer @ 1% | Extra cost of not filing |
|---|---|---|---|
| PKR 500,000 | 2,500 | 5,000 | 2,500 |
| PKR 1,000,000 | 5,000 | 10,000 | 5,000 |
| PKR 2,000,000 | 10,000 | 20,000 | 10,000 |
Section 236Y Is Adjustable — Not Final
This is the part most taxpayers miss. Section 236Y tax is not a permanent cost — it's an adjustable advance tax:
- The bank deducts advance tax on each international card transaction during the year
- Deductions are recorded against your NTN or CNIC in FBR's system
- When you file your annual return, you compute your total tax liability
- Section 236Y tax is credited in full against that liability
- If deductions exceed your liability, the excess is refundable
Important: To get the credit or refund, you must file your annual return. Non-filers cannot claim back any advance tax deducted — the money is effectively lost. That's on top of paying double the rate at source.
What's Covered — and What Isn't
| Transaction Type | Examples | 236Y Applies? |
|---|---|---|
| International travel | Airline tickets, hotel bookings, visa fees | Yes |
| Online subscriptions | Streaming, Adobe, Microsoft 365, cloud services | Yes |
| International e-commerce | Foreign online marketplaces | Yes |
| Foreign education fees | Tuition, exam fees, online courses | Yes |
| Business software & tools | Developer, design and collaboration tools | Yes |
| Domestic transactions | Local shops, Pakistani websites, local ATM withdrawals | No |
How to Check Your 236Y Deductions
- Log in to iris.fbr.gov.pk with your credentials
- Open the income tax return / advance tax section
- Review your withholding tax ledger — bank deductions under Section 236Y appear here
- Cross-check against your bank/card statements
If deductions are missing from your ledger, contact your bank and confirm your CNIC/NTN is correctly linked to the card account.
Frequently Asked Questions
What is the current Section 236Y rate?
0.5% for filers on the ATL and 1% for non-filers — reduced from the earlier 5% and 10% rates.
Is Section 236Y adjustable or final tax?
Adjustable. The full amount is credited against your annual tax liability when you file, and any excess is refundable.
Does it apply to domestic card transactions?
No. It applies only to amounts paid or remitted abroad through Pakistani-issued cards.
Can a non-filer claim it back?
Only by filing a return. Without a return there's no way to claim the credit or refund, so the amount is effectively lost.
Is there a minimum transaction threshold?
In practice banks apply the withholding to international card transactions generally. Even small subscription payments will have the applicable tax deducted.
Summary
| Point | Position |
|---|---|
| Filer rate | 0.5% — Finance Act 2026 (previously 5%) |
| Non-filer rate | 1% — Finance Act 2026 (previously 10%) |
| Nature of tax | Adjustable — not final |
| Applies to | International payments via Pakistani credit/debit/prepaid cards |
| Refundable? | Yes — if you file your return |
Bottom Line: Following the Finance Act 2026, Section 236Y advance tax on international card payments is now 0.5% for filers and 1% for non-filers — a tenfold reduction from the previous 5% and 10%. It remains an adjustable tax, so filers get every rupee credited against their annual liability. Non-filers still pay double and, without filing, can never claim it back. Want the exact rate on any transaction? Try our Withholding & Advance Tax Calculator, or check your status with ATL Check.
Disclaimer: This article is for educational purposes only and does not constitute professional tax advice. The rates stated here reflect the position after the Finance Act 2026. Rates and provisions under the Income Tax Ordinance, 2001 change through Finance Acts and FBR notifications. Always verify the current position at fbr.gov.pk or consult a qualified tax practitioner.
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