Under Section 235 of the Income Tax Ordinance, domestic consumers on the Active Taxpayer List are exempt, while tax collected from commercial and industrial consumers is subject to specified adjustment rules.

The Federal Board of Revenue (FBR) has clarified the rules for collecting advance income tax on electricity bills during Tax Year 2027, covering the period from July 1, 2026, to June 30, 2027.

According to the Income Tax Ordinance 2001, updated up to June 30, 2026, Section 235 provides for advance tax collection on electricity consumption by commercial, industrial and domestic consumers.

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However, domestic electricity consumers whose names appear on the Active Taxpayer List (ATL) are exempt from this collection.

Under the provision, electricity distribution companies and other bill-issuing entities must collect advance tax alongside electricity charges. The taxable bill amount includes sales tax and all incidental charges.

Who is exempt from electricity bill tax?

The FBR has specified that advance tax under Section 235 will not be collected from individuals who provide a certificate issued by the Commissioner Inland Revenue confirming that:

• Their income for the relevant tax year is exempt from income tax.

• They have already discharged their advance tax liability under Section 147.

• Their entire income falls under the final tax or minimum tax regime under other provisions of the Income Tax Ordinance.

Electricity bill tax adjustment and minimum tax rules

Section 235 also establishes different treatment for individuals and companies.

For individual taxpayers, advance tax collected on electricity bills up to Rs360,000 annually will be treated as minimum tax on their income, and no refund will be allowed.

However, tax collected on monthly electricity bills exceeding Rs30,000 will be adjustable.

For companies, the entire advance tax collected under Section 235 will remain adjustable against their income tax liability.

The provisions establish the tax collection and adjustment framework for electricity consumers throughout Tax Year 2027.

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