What is Advance Tax on Brokerage and Commission?
Advance tax on brokerage and commission is a withholding tax deducted at source by the payer (principal) on payments made to the agent.
• Governed by Section 233 of the Income Tax Ordinance, 2001 (updated for 2026)
• Applies to Federal, Provincial, Local Governments, companies, associations of persons, and individuals with turnover ≥ Rs. 100 million
• Ensures tax compliance and collection at source
✅ Key: The tax collected or deducted is treated as minimum tax on the agent’s income.
Who Deducts and Who Pays the Tax?
1. The Principal
• Any entity paying brokerage or commission (government, company, association, or high-turnover individual)
• Responsible for deducting advance tax at source from payment to the agent
2. The Agent
• Receives the brokerage or commission
• If the agent retains commission from payments made to principal, the principal is deemed to have paid the agent, and tax is collected accordingly
Special Case: Advertising Agents
• If the principal pays an advertising agent directly or through media, additional tax is calculated as:
A x 15/ 85
Where:
• A = amount paid to media for advertising (excluding commission)
• This tax counts as minimum tax on the agent’s income
🔔 This ensures both commission and advertising payments are covered under withholding tax rules.
Tax Rate Table – Section 233
| S. No | Person | Rate of Advance Tax | Notes |
| 1 | Advertising Agents | 10% | Tax deducted at source; treated as minimum tax |
| 2 | Life Insurance Agents (commission < Rs. 0.5 million/year) | 8% | Deducted by principal on commission payments |
| 3 | Other Persons | 12% | Applies to all remaining agents receiving brokerage or commission |
⚠ The tax is deducted from the payment made and is adjustable against annual tax liability of the agent.
How the Tax is Calculated – Examples
Example 1: Advertising Agent
• Payment received: Rs. 200,000
• Advance tax rate: 10%
• Tax deducted at source: Rs. 20,000
Example 2: Life Insurance Agent
• Annual commission: Rs. 400,000 (<0.5 million)
• Tax rate: 8%
• Tax deducted: Rs. 32,000
Example 3: Other Agents
• Commission: Rs. 500,000
• Tax rate: 12%
• Tax deducted: Rs. 60,000
💡 Note: For advertising agents, if media payments are involved, use the 15/85 formula to calculate additional tax.
Key Points to Remember
• Tax collected or deducted under Section 233 is minimum tax on the agent’s income
• Principal is legally responsible to deduct and deposit tax with FBR
• Non-compliance may result in penalty or legal action
• Advertising agents have specific computation rules separate from standard commission
Checklist for Agents and Principals
• Confirm if principal is required to deduct tax under Section 233
• Determine type of agent (advertising, life insurance, other)
• Apply correct advance tax rate (8%, 10%, 12%)
• For advertising agents, calculate additional tax using A × 15/85 formula
• Ensure tax is deposited with FBR promptly
• Retain proof of tax deduction for annual filing
Disclaimer: This article is for informational purposes only. Tax rates and procedures may change, and professional advice should be sought for specific transactions. For updates, consult the Federal Board of Revenue (FBR).