Rate of income tax on brokerage, commission

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of income tax on brokerage and commission to be applicable for tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

The FBR updated rate of tax for deduction or collection brokerage and commission under Section 233 of Income Tax Ordinance, 2001 shall be as set out in the following table:

S.No.PersonRate of Tax
(1)(2)(3)
1.Advertising Agents10%
2.Life Insurance Agents where commission received is less than Rs.0.5 million per annum8%
3.Persons not covered in 1 and 2 above12%

Following is Section 233 under which the tax is applicable on brokerage and commission:

233. Brokerage and commission. — (1) Where any payment on account of brokerage or commission is made by the Federal Government, a Provincial Government, a Local Government, a company or an association of persons constituted by, or under any law (hereinafter called the “principal”) to a person (hereinafter called the “agent”), the principal shall deduct advance tax at the rate specified in Division II of Part IV of the First Schedule from such payment.

(2) If the agent retains Commission or brokerage from any amount remitted by him to the principal, he shall be deemed to have been paid the commission or brokerage by the principal and the principal shall collect advance tax from the agent.

(2A) Notwithstanding the provisions of sub-section (1), where the principal is making payment on account of commission to an advertising agent, directly or through electronic or print media, the principal shall deduct tax (in addition to tax required to be deducted under clause (b) of sub-section (1) of section 153 on advertising services excluding commission), at the rate specified in Division II of Part IV of the First Schedule on the amount equal to-

A X 15/85

Where A = amount paid or to be paid to electronic or print media for advertising services (excluding commission) on which tax is deductible under clause (b) of sub-section (I) of section 153.

(2B) Tax deducted under sub-section (2A) shall be minimum tax on the income of the advertising agent.

(3) Where any tax is required to be collected from a person under sub-section (1), such tax shall be the minimum tax on the income of such persons.

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