Karachi, March 7, 2025 – The Federal Board of Revenue (FBR) has successfully collected Rs 85 billion as advance income tax on electricity consumption during the first half (July – December) of the ongoing fiscal year 2024-25.
This marks a substantial 23% increase compared to Rs 69 billion collected in the corresponding period of the previous fiscal year.
The FBR enforces the collection of advance tax on electricity usage under Section 235 of the Income Tax Ordinance, 2001. This provision mandates that tax be levied on electricity consumption for commercial, industrial, and specific domestic consumers. The tax is directly applied to electricity bills, with rates varying according to the consumer category and bill amount.
Key Provisions of Section 235 on Electricity Consumption:
• Sub-section (1): Advance tax is imposed on electricity consumption at rates specified in the First Schedule of the Income Tax Ordinance. However, domestic consumers who are on the Active Taxpayers’ List (ATL) are exempt from this tax.
• Sub-section (2): The entity responsible for issuing electricity bills must collect the tax alongside other applicable charges such as sales tax and incidental levies.
• Sub-section (3): Individuals who provide a certificate proving their income is exempt or have already paid advance tax under Section 147 are not subject to this tax. Additionally, taxpayers under the final tax regime are also exempt.
• Sub-section (4): For non-corporate taxpayers whose total annual electricity bill does not exceed Rs 360,000, the advance tax is treated as a minimum tax. However, for companies, the tax is adjustable against their total tax liability at the end of the fiscal year.
Tax Rates on Electricity Bills:
• No tax is applied to electricity bills up to Rs 500.
• 10% tax is levied on bills exceeding Rs 500 but not more than Rs 20,000.
• For bills above Rs 20,000, commercial consumers are charged Rs 1,950 plus 12% of the amount exceeding Rs 20,000, while industrial consumers are charged at a 5% rate.
• Domestic consumers face no tax on bills below Rs 25,000, but a 7.5% tax is imposed on bills of Rs 25,000 or more.
In December 2024 alone, the FBR collected Rs 12 billion through electricity bills, reflecting a modest 1% growth compared to Rs 11.82 billion in December 2023. The FBR remains committed to maximizing tax collection through electricity consumption, ensuring greater compliance and revenue generation for the national economy.