Karachi, July 27, 2024 – The Federal Board of Revenue (FBR) has announced the new income tax rates on electricity consumption for the fiscal year 2024-25. The updated rates are part of the amendments made to the Income Tax Ordinance, 2001 through the Finance Act, 2024.
These changes are aimed at enhancing the collection of withholding income tax under the specified rates in Division IV of Part-IV of the First Schedule of the Income Tax Ordinance, 2001.
Electricity Consumption Rates for Commercial and Industrial Consumers
The FBR has specified the rate of tax collection from commercial and industrial consumers based on the gross amount of their electricity bills. The following table outlines the applicable rates:
| S. No | Gross Amount of Bill | Tax |
| 1 | Up to Rs. 500 | Rs. 0 |
| 2 | Exceeds Rs. 500 but does not exceed Rs. 20,000 | 10% of the amount |
| 3 | Exceeds Rs. 20,000 | Rs. 1950 plus 12% of the amount exceeding Rs. 20,000 for commercial consumers |
| Rs. 1950 plus 5% of the amount exceeding Rs. 20,000 for industrial consumers |
Electricity Consumption Rates for Domestic Consumers
For domestic electricity consumption, the rates are as follows:
• Zero percent if the amount of the monthly bill is less than Rs. 25,000.
• 7.5% if the amount of the monthly bill is Rs. 25,000 or more.
Detailed Explanation under Section 235 of the Income Tax Ordinance, 2001
The withholding tax on electricity consumption is comprehensively detailed under Section 235 of the Income Tax Ordinance, 2001. The key points are summarized below:
1. Advance Tax Collection:
o Advance tax shall be collected at the rates specified in Division IV of Part-IV of the First Schedule on the amount of the electricity bill for commercial, industrial, or domestic consumers.
o Domestic consumers whose names appear on the Active Taxpayers’ List are exempt from this provision.
2. Billing and Tax Collection:
o The entity preparing the electricity bill shall charge the advance tax as part of the overall electricity consumption charges, inclusive of sales tax and all incidental charges.
3. Exemptions:
o Advance tax shall not be collected from individuals who provide a certificate from the Commissioner indicating their income is exempt from tax, have discharged advance tax liability under section 147, or whose entire income is subject to final tax or minimum tax regimes under other provisions of the Ordinance.
4. Adjustments and Minimum Tax:
o For non-corporate taxpayers, tax collected up to an annual bill amount of Rs. 360,000 shall be treated as the minimum tax on their income, with no refunds allowed.
o Tax collected on monthly bills exceeding Rs. 30,000 for non-corporate taxpayers shall be adjustable.
o For companies, all collected tax shall be adjustable against their tax liability.
These new tax rates are designed to streamline tax collection and ensure compliance across different consumer categories. The FBR’s updated income tax rates on electricity consumption reflect a comprehensive approach to broadening the tax base and enhancing revenue collection.
This move is expected to have significant implications for all electricity consumers, especially those in the commercial and industrial sectors, as they will need to account for these additional costs in their financial planning for the year.
For further details, consumers are encouraged to review the full text of the Finance Act, 2024 and the updated provisions of the Income Tax Ordinance, 2001.