Section 158 of the Income Tax Ordinance, 2001 requires tax on profit on debt to be deducted at the earlier of payment or credit to the recipient’s account, while other deductions generally apply when payment is made.

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the timing of withholding tax deductions under Section 158 of the Income Tax Ordinance, 2001, for tax year 2027.

The provision is included in the Income Tax Ordinance updated up to 30 June 2026 and applies to the tax year running from 1 July 2026 to 30 June 2027. <Cite refs={[“turn422318search1″,”turn422318search4”]}/>

Under Section 158, a person required to deduct tax from an amount paid must follow the prescribed timing rules, which distinguish between profit on debt and other payments.

Tax deduction on profit on debt

Section 158(a) provides that withholding tax under Section 151 must be deducted when the amount is paid or credited to the recipient’s account, whichever occurs earlier.

This means the withholding obligation may arise when profit on debt is credited to the recipient’s account, even if the actual payment takes place later.

Timing for other withholding tax deductions

Under Section 158(b), withholding tax in other cases must generally be deducted when the amount is actually paid.

The provision also states under Section 158(c) that the expression “amount actually paid” has the meaning prescribed under the relevant rules.

These requirements establish the timing for tax deduction at source and help withholding agents determine when they must deduct tax from payments.

Businesses and other withholding agents should ensure that their payment and accounting procedures comply with Section 158 and the specific withholding provisions applicable to each transaction.