Section 233 requires eligible businesses and government entities to deduct withholding tax on brokerage and commission payments, with deductions treated as minimum tax.
The Federal Board of Revenue (FBR) has outlined advance tax requirements on brokerage and commission payments for Tax Year 2027, covering July 1, 2026, to June 30, 2027.
According to the Income Tax Ordinance, 2001, updated up to June 30, 2026, Section 233 governs the deduction of advance tax on brokerage and commission income.
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Under this provision, the Federal Government, provincial governments, local governments, companies, associations of persons and individuals with annual turnover of Rs100 million or more must deduct advance tax when making brokerage or commission payments.
The tax must be deducted at rates specified in Division II of Part IV of the First Schedule.
The law also covers situations where an agent retains brokerage or commission from amounts otherwise payable to the principal. In such cases, the retained amount is treated as commission or brokerage paid by the principal, which must collect the applicable advance tax from the agent.
Special rules for advertising agents
Section 233 also provides a separate mechanism for commission paid to advertising agents through electronic or print media.
Where a principal pays commission to an advertising agent, directly or through electronic or print media, additional tax must be deducted using the prescribed formula:
A × 15/85
Here, A represents the amount paid or payable to electronic or print media for advertising services, excluding commission, on which tax is deductible under Section 153(1)(b).
The FBR has clarified that tax deducted under this provision will constitute minimum tax on the advertising agent’s income.
Similarly, tax collected under Section 233(1) will be treated as minimum tax on the agent’s income.
The provision forms part of Pakistan’s withholding tax framework for documenting brokerage and commission transactions and ensuring tax collection at source.
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