Karachi, August 21, 2025 – The Federal Board of Revenue (FBR) has officially notified revised withholding tax rates on dividend income for the tax year 2025-26, following amendments introduced through the Finance Act, 2025.
According to Section 150 of the Income Tax Ordinance, 2001, any entity disbursing a dividend is legally required to deduct or collect withholding tax at specified rates before payment. The revised framework introduces differentiated rates based on the nature of the payer, recipient, and tax compliance status, particularly whether the taxpayer is on the Active Taxpayers List (ATL) or not.
The withholding tax on dividend income now covers multiple categories, including Independent Power Producers (IPPs), Real Estate Investment Trusts (REITs), Mutual Funds, and Special Purpose Vehicles (SPVs). Higher rates are applicable to non-ATL taxpayers to encourage compliance and broaden the tax base.
Below is the updated schedule for dividend withholding tax rates for tax year 2025-26:
| Section | Description | ATL Rate | Non-ATL Rate |
| 150 Dividend | Paid by Independent Power Purchasers (IPPs) | 7.50% | 15.00% |
| 150 Dividend | REIT and other cases (except clauses a, ba, c, d) | 15.00% | 30.00% |
| 150 Dividend | Mutual funds (based on income mix) | 25% & 15% | 50% & 30% |
| 150 Dividend | Mutual funds with 50%+ income from profit on debt | 25.00% | 50.00% |
| 150 Dividend | REIT scheme from Special Purpose Vehicle | 0.00% | 0.00% |
| 150 Dividend | Others from Special Purpose Vehicle | 35.00% | 70.00% |
| 150 Dividend | Companies with exempt income or losses | 25.00% | 50.00% |
The FBR emphasized that these updated withholding tax measures aim to strengthen revenue collection and ensure fair taxation on dividend earnings.