Section 231B requires tax collection at vehicle registration, transfer and sale, with a 4% advance tax applicable to non-filers leasing motor vehicles.
The Federal Board of Revenue (FBR) has outlined advance income tax requirements on motor vehicles 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 231B governs advance tax collection on motor vehicles.
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Under the provision, the Excise and Taxation Department must collect advance tax at the time of vehicle registration and transfer of ownership at rates specified in Division VII of Part IV of the First Schedule.
However, tax collection on registration and ownership transfer is not applicable after five years from the vehicle’s first registration in Pakistan.
The law also requires vehicle manufacturers to collect advance tax when selling a car or jeep. Similarly, leasing companies, scheduled banks and other financial institutions must collect advance tax at 4% of the vehicle’s value when leasing a motor vehicle to a person not appearing on the Active Taxpayers List (ATL).
For locally manufactured vehicles sold before registration by the original purchaser, the registration authority must collect the applicable advance tax.
The tax collected under Section 231B is adjustable against the taxpayer’s income tax liability. However, the provision exempts the federal, provincial and local governments, foreign diplomats and diplomatic missions in Pakistan.
The section covers cars, jeeps, pickups, SUVs, trucks, vans and other automobiles, while excluding public transport vehicles, goods carriers, agricultural machinery, rickshaws and motorcycles, and vehicles with engine capacity up to 200cc.
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