One of the most misunderstood areas of withholding tax in Pakistan is whether the tax deducted under Section 153 — on payments for goods, services and contracts — is adjustable (a credit you get back) or minimum tax (a floor you can't go below). The answer isn't the same for everyone: it depends on who receives the payment. Getting this wrong can mean overpaying, or wrongly expecting a refund that never comes.
This guide explains the position clearly, straight from the law. Based on Section 153 of the Income Tax Ordinance, 2001 as amended up to the Finance Act 2025.
Key Point: Section 153 tax is minimum tax by default on goods and contracts — but it becomes adjustable for a public company listed on a registered stock exchange (and a company manufacturer selling its own goods). Tax on services is minimum tax.
What Section 153 Covers
Section 153 requires a withholding agent (the payer) to deduct tax when making payments for:
| Clause | Payment for |
|---|---|
| 153(1)(a) | Sale of goods (including toll manufacturing) |
| 153(1)(b) | Rendering or providing of services |
| 153(1)(c) | Execution of contracts |
Adjustable or Minimum? The Rule by Recipient
| Recipient | Goods 153(1)(a) | Contracts 153(1)(c) | Services 153(1)(b) |
|---|---|---|---|
| Public company (listed on stock exchange) | Adjustable | Adjustable | Minimum |
| Company — manufacturer selling own goods | Adjustable | — | Minimum |
| Individuals & AOPs (ordinary) | Minimum | Minimum | Minimum |
The law (Section 153(3)): tax deducted on goods and contracts is treated as minimum tax, except on the sale of goods and execution of contracts by a public company listed on a registered stock exchange — which is adjustable. A separate proviso confirms tax on services under 153(1)(b) is minimum tax.
What "Adjustable" vs "Minimum" Actually Means
| Feature | Adjustable | Minimum |
|---|---|---|
| The tax deducted is… | A credit against normal tax | A floor — the least you'll pay |
| At filing | Adjusted; refund possible | Pay higher of normal vs minimum |
| If normal tax is lower | You may get a refund | Minimum stands — no refund below it |
Worked Examples
Example 1 — Listed public company (adjustable)
A public company listed on the stock exchange supplies goods worth Rs 10,000,000 to a corporate buyer, who deducts tax under 153(1)(a). For this listed company, the deduction is adjustable — it's treated as a credit against the company's normal tax, and if its actual tax works out lower, a refund is possible.
Example 2 — Individual supplier (minimum)
Mr. Aslam, an individual, supplies goods worth Rs 2,000,000 to a company. Tax is deducted under 153(1)(a). For him, it is minimum tax — even if his computed normal tax is lower (or he made a loss), he cannot recover below the minimum. If his normal tax is higher, he pays that instead.
Example 3 — AOP executing a contract (minimum)
An AOP completes a construction contract worth Rs 5,000,000 and tax is deducted under 153(1)(c). As an ordinary AOP, this is minimum tax — a floor on its tax for that income.
Example 4 — Service provider (minimum)
A consultant (individual) is paid Rs 1,500,000 for services, with tax deducted under 153(1)(b). By the express proviso, tax on services is minimum tax — so the deduction sets the floor regardless of the consultant's computed profit.
Why the Law Splits It This Way
The logic is documentation and verifiability. A listed public company files audited accounts and is heavily regulated, so the tax authority trusts its normal computation and treats the deduction as a credit. Individuals and AOPs are less documented, so the law sets a minimum floor to ensure a baseline collection regardless of declared profit. Services are kept as minimum tax across the board because service margins are easy to under-state.
Frequently Asked Questions
Is withholding tax under Section 153 adjustable or minimum?
It depends on the recipient. For ordinary individuals and AOPs, tax on goods and contracts is minimum tax. For a public company listed on a registered stock exchange, it is adjustable. Tax on services (153(1)(b)) is minimum tax.
Is Section 153 tax on services adjustable?
No. The proviso to Section 153 makes tax deducted on services under 153(1)(b) minimum tax — you pay the higher of normal tax or the minimum.
When is Section 153 tax adjustable?
On the sale of goods and execution of contracts by a public company listed on a registered stock exchange, and for a company manufacturer selling its own manufactured goods. For most other taxpayers it is minimum tax.
Summary
| Who / What | Treatment |
|---|---|
| Listed public company — goods & contracts | Adjustable |
| Company manufacturer — own goods | Adjustable |
| Individuals & AOPs — goods & contracts | Minimum tax |
| Everyone — services (153(1)(b)) | Minimum tax |
Bottom Line: Under Section 153, tax on goods and contracts is minimum tax for ordinary individuals and AOPs, but adjustable for a listed public company (and a company manufacturer selling its own goods). Tax on services is minimum tax for everyone. Knowing which applies to you decides whether that deduction is money you can get back — or a floor you simply pay.
Disclaimer: This article is for educational purposes only and reflects Section 153 of the Income Tax Ordinance, 2001 as amended up to the Finance Act 2025. The list of "specified persons" and the adjustable/minimum treatment are amended frequently 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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