Section 156 of the Income Tax Ordinance, 2001 requires tax deduction on prize bond winnings, lottery prizes and other specified rewards, with the tax treated as final on such income.

ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the rules for withholding tax on prize bond winnings and other prizes under Section 156 of the Income Tax Ordinance, 2001, for tax year 2027.

The provisions are included in the Income Tax Ordinance updated up to 30 June 2026 for tax year 2027, covering the period from 1 July 2026 to 30 June 2027. The FBR publishes the applicable withholding tax rate card for the tax year on its official website. <Cite refs={[“turn997147search2″,”turn997147search0”]}/>

Under Section 156(1), any person paying a prize on a prize bond or winnings from a raffle, lottery, quiz, crossword puzzle or a company-sponsored sales promotion must deduct tax from the gross amount paid at the rate specified in Division VI of Part III of the First Schedule.

The provision covers a range of prizes and promotional rewards, placing responsibility on the payer to deduct the applicable tax before making payment to the winner.

Tax on prizes awarded in kind

Section 156(2) addresses prizes that are not paid in cash. Where a prize is awarded in kind, the person providing it must collect tax calculated on the prize’s fair market value.

This requirement means that a winner receiving a non-cash reward must account for the applicable tax even when the prize is not paid in monetary form.

Tax treated as final

Under Section 156(3), tax deducted from cash prizes or collected on non-cash rewards is treated as the final tax on income from the prizes and winnings covered by the provision.

The applicable rate depends on the category of prize. For the precise rates for tax year 2027, taxpayers and prize distributors should consult the FBR’s official withholding tax rate card and the relevant First Schedule provisions.