Subtitle: Mobile, internet and prepaid services remain subject to 15% withholding tax, while specified non-filers face a 75% rate under Section 114B.
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the withholding tax rates applicable to telephone, mobile phone and internet usage for Tax Year (TY) 2027, which commenced on July 1, 2026, under the updated Income Tax Ordinance, 2001.
The revised rates have been incorporated into the Income Tax Ordinance, 2001, updated through June 30, 2026, following amendments introduced by the Finance Act, 2026. The tax collection mechanism is governed by Section 236 of the Ordinance.
Withholding tax on telephone bills
Under the updated law, withholding tax will be collected from telephone subscribers, other than mobile phone subscribers, where the monthly bill exceeds Rs1,000.
The applicable rate is:
• Telephone subscribers (excluding mobile phone subscribers): 10% of the amount exceeding Rs1,000 in the monthly bill.
Tax on mobile phone and internet services
The FBR has retained a 15% withholding tax on payments made by subscribers of the following services:
• Mobile telephone services
• Internet services
• Prepaid internet cards
• Prepaid telephone cards
• Sale of mobile or internet units through any electronic medium or any other form
The applicable withholding tax rates are:
| Category | Withholding tax rate |
| Mobile phone subscribers | 15% |
| Internet subscribers | 15% |
| Prepaid internet cards | 15% |
| Prepaid telephone cards | 15% |
| Sale of units through electronic medium or any other form | 15% |
Higher tax for specified non-filers
The updated law prescribes a significantly higher withholding tax for persons specified in an Income Tax General Order issued under Section 114B of the Income Tax Ordinance, 2001.
Such persons will be liable to pay 75% withholding tax on:
• Mobile phone bills
• Internet bills
• Sale price of prepaid internet cards
• Sale price of prepaid telephone cards
• Sale of mobile or internet units through any electronic medium or any other form
The enhanced rate is aimed at encouraging tax compliance by persons identified under Section 114B.
Effective from July 1, 2026
The notified withholding tax rates form part of the Income Tax Ordinance, 2001, updated through June 30, 2026, incorporating amendments made under the Finance Act, 2026.
The latest notification provides certainty to telecom operators, internet service providers, withholding agents and consumers regarding the tax collection mechanism applicable to telephone, mobile phone and internet usage during Tax Year 2027, ensuring compliance with the provisions of the Income Tax Ordinance, 2001.