FBR introduces 1% withholding tax on digital payments and 2% on Cash on Delivery transactions under the Finance Act, 2026
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax rates applicable to payments for digitally ordered goods and services through e-commerce platforms for Tax Year 2027, effective from July 1, 2026.
The new withholding tax rates have been prescribed under Section 6A of the updated Income Tax Ordinance, 2001, incorporating amendments introduced through the Finance Act, 2026.
Tax rates linked to payment method
According to the FBR, the applicable withholding tax will depend on the payment method used for purchases made through e-commerce platforms, including websites.
The notified tax rates are as follows:
| Payment Method | Tax Rate |
| Digital payments or banking channels through a payment intermediary | 1% of the gross amount paid or payable |
| Cash on Delivery (COD) through courier services | 2% of the gross amount paid or payable |
Lower tax rate for digital payments
Under the updated provisions, a 1% withholding tax will apply where payment for digitally ordered goods or services is made through digital means or banking channels via a payment intermediary.
The lower rate is intended to encourage the use of formal digital payment systems and support the growth of Pakistan’s digital economy.
Higher tax on Cash on Delivery transactions
The FBR has prescribed a 2% withholding tax on the gross amount paid or payable for purchases made through the Cash on Delivery (COD) option.
The tax will be collected by the courier company responsible for delivering the goods and collecting payment from the customer.
Effective from Tax Year 2027
The notified rates form part of the updated Income Tax Ordinance, 2001, as amended through the Finance Act, 2026, and are applicable from July 1, 2026, for Tax Year 2027.
The FBR has advised payment intermediaries, courier companies and e-commerce platforms to implement the prescribed withholding tax rates for all eligible digital commerce transactions in accordance with Section 6A of the Income Tax Ordinance.
The new tax framework establishes separate withholding tax rates based on the method of payment, with digital transactions attracting a lower rate than Cash on Delivery purchases.