Islamabad, January 27, 2026 — The Federal Board of Revenue (FBR) has reported a sharp 37 percent increase in withholding income tax collection from retailers during the first half of the ongoing fiscal year 2025-26 (July–December), compared to the same period last year.
According to provisional withholding tax data, the FBR collected Rs21.72 billion from retailers in 1HFY26, up from Rs15.84 billion recorded during the corresponding half of the previous fiscal year, reflecting a significant improvement in tax compliance within the retail sector.
In December 2025, the FBR collected Rs3.82 billion from retailers under this head as compared with Rs3.13 billion in the same month of the previous year.
Sources at the FBR attributed the surge primarily to the government’s ongoing documentation drive, which has strengthened enforcement mechanisms and compelled manufacturers and distributors to collect withholding tax from retailers on behalf of the tax authority.
Under Section 236H of the Income Tax Ordinance, manufacturers, distributors, dealers, wholesalers, and commercial importers are legally required to collect advance tax at the time of selling goods to retailers. The same obligation applies when distributors or dealers sell goods to wholesalers within the specified sectors.
The law further allows retailers to claim credit for the tax collected under Section 236H when calculating their final tax liability for the relevant tax year.
As per FBR rules, the withholding tax rate for retailers listed on the Active Taxpayers List (ATL) stands at 0.5 percent, while retailers not appearing on the ATL are subject to a significantly higher rate of 2.5 percent.
Tax officials believe the differential tax rates and enhanced monitoring have played a crucial role in encouraging retailers to join the tax net, contributing to higher revenue collection during the first half of FY26.
The FBR expects withholding tax receipts from the retail sector to continue rising as enforcement measures and documentation efforts intensify in the coming months.