Commercial, industrial and domestic electricity consumers to pay advance income tax under updated Income Tax Ordinance from July 1, 2026.
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the advance income tax rates applicable to electricity consumption for Tax Year (TY) 2027, which commenced on July 1, 2026, under the updated Income Tax Ordinance, 2001.
The revised rates have been incorporated into the Income Tax Ordinance, 2001, updated to June 30, 2026, following amendments introduced through the Finance Act, 2026. The advance tax is to be collected through electricity bills issued to commercial, industrial and domestic consumers.
Advance tax rates for commercial and industrial consumers
Under the updated law, advance income tax on electricity bills for commercial and industrial consumers will be collected based on the gross amount of the electricity bill.
Commercial consumers
• Up to Rs500: Nil
• Exceeds Rs500 but does not exceed Rs20,000: 10% of the amount
• Exceeds Rs20,000: Rs1,950 plus 12% of the amount exceeding Rs20,000
Industrial consumers
• Up to Rs500: Nil
• Exceeds Rs500 but does not exceed Rs20,000: 10% of the amount
• Exceeds Rs20,000: Rs1,950 plus 5% of the amount exceeding Rs20,000
The updated schedule shows that commercial consumers with higher electricity bills will pay a higher rate of advance income tax than industrial consumers.
Tax rates for domestic electricity consumers
The FBR has also prescribed advance income tax rates for domestic electricity consumers based on the monthly electricity bill.
• Monthly electricity bill below Rs25,000: No advance income tax
• Monthly electricity bill of Rs25,000 or more: 7.5% advance income tax
Accordingly, domestic consumers whose monthly electricity bill remains below Rs25,000 will not be subject to advance income tax, while those with bills of Rs25,000 or above will pay tax at the rate of 7.5%.
Effective from July 1, 2026
The notified rates form part of the Income Tax Ordinance, 2001, updated through June 30, 2026, incorporating amendments made under the Finance Act, 2026.
The latest notification provides clarity to electricity consumers, power distribution companies and withholding agents regarding the advance income tax regime applicable to electricity consumption during Tax Year 2027. The prescribed rates are intended to ensure uniform tax collection through electricity bills in accordance with the provisions of the Income Tax Ordinance, 2001.