Tax on Commission and Brokerage Income in Pakistan
The payer deducts before you see it, and netting off your commission is treated as payment. Who must deduct, and how to keep the credit.
If you earn commission, the person paying you may be required to deduct tax before you see it, and keeping your cut out of the money you send them does not avoid it. The law treats that as though you had been paid.
It applies to property dealers, insurance agents, travel agents, distributors, advertising agencies and anyone else working on commission.
We read section 233 of the Income Tax Ordinance, 2001 on 4 September 2026, in the consolidated text FBR publishes on its own download site.
Who has to deduct
The section calls the payer the principal and the recipient the agent, and it does not apply to every payer.
| Principal | Inside the section |
|---|---|
| Federal Government | Yes |
| Provincial Government | Yes |
| Local Government | Yes |
| A company | Yes |
| An association of persons or individual | Only with turnover of Rs 100 million or more |
That turnover threshold matters. A small business paying you commission is not a principal for this purpose. A company of any size is.
Netting off your commission does not work
Subsection 2 closes the obvious workaround, and agents do this without realising it creates a tax event.
If the agent retains commission or brokerage from an amount he remits to the principal, he is deemed to have been paid that commission by the principal, and the principal shall collect advance tax from the agent.
So the common arrangement of collecting money from a customer, keeping your commission and sending the balance on, is treated exactly the same as being paid separately. The tax does not disappear because the money never moved in your direction.
The practical consequence is that the principal has to collect it from you, which usually means an adjustment on your next settlement. Expect it rather than dispute it.
Advertising agents have their own formula
Subsection 2A singles out advertising, and it is the only place in the section with a calculation written into it.
Where the principal pays commission to an advertising agent, directly or through electronic or print media, the principal deducts tax on an amount equal to A multiplied by 15 and divided by 85. That is in addition to the tax required under section 153 on advertising services, excluding the commission itself.
If you run an agency or place advertising for clients, that formula and the interaction with section 153 are worth putting in front of your accountant before your next settlement, because two separate deductions apply to the same transaction.
What to do about it
The deduction is not the problem. Losing the credit for it is.
- Ask the principal for a tax deduction certificate for each year.
- Check your CNIC or NTN appears on it correctly.
- Keep certificates from every principal you work with.
- Note deductions taken by adjustment as well as by direct payment.
- Hand them all to whoever prepares your return.
Agents often work with several principals and collect nothing from any of them. If the deposit does not carry your identifier, the credit never attaches to you, and nobody will chase it on your behalf.
Filing is what turns it into money
Tax deducted at source only helps somebody who files a return. If you never file, the deduction is simply a cost of doing business.
It is worse if you are off the Active Taxpayer List, because no refund is issued while a person is off it. Our guide to the ATL surcharge and the 30 September deadline sets out what returning to the list now costs.
For anyone whose income is mostly commission, this is the difference between paying tax and overpaying it every year without ever reclaiming the excess.
If you also draw a salary
Many agents have salaried income alongside commission, and there is a practical trick most people miss.
Section 149 requires your employer to compute your monthly salary deduction after adjusting tax already withheld from you under other heads, on documentary evidence. Commission deduction certificates are exactly that evidence.
Our guide to how salary tax is deducted explains how to make that request in writing, which reduces the monthly deduction rather than leaving you to reclaim it later.
Why no rate is quoted
Section 233 sets out who deducts and when. The rate sits in Division II of Part IV of the First Schedule, which changes with each Finance Act.
The consolidated Ordinance FBR publishes is amended up to 20 February 2026, before the Finance Act, 2026 took effect on 1 July 2026, so the table in the copy we can read is not current. Rates in this area also commonly differ by filer status.
Common questions
Who deducts tax on commission?
The Federal, Provincial or Local Government, a company, or an association of persons or individual with turnover of Rs 100 million or more.
Does a small business have to deduct?
An association of persons or an individual is only inside the section at turnover of Rs 100 million or more. A company is inside it regardless.
I keep my commission from what I collect. Does that avoid the tax?
No. Subsection 2 deems you to have been paid the commission, and the principal must collect the tax from you.
Is advertising treated differently?
Yes. Subsection 2A applies a formula of A multiplied by 15 over 85, in addition to tax under section 153 on advertising services excluding commission.
How do I claim the tax back?
Through your return, using deduction certificates from every principal, with your CNIC or NTN on them.
What is the rate?
We do not quote one. It sits in the First Schedule and the published Ordinance predates the Finance Act, 2026.
Last checked and sources
Last checked 4 September 2026. We downloaded the consolidated Income Tax Ordinance, 2001 from FBR's own download site, the version amended up to 20 February 2026, and read section 233 in it. That 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 or individual having turnover of one hundred million rupees or more, called the principal, to a person called the agent, the principal shall deduct advance tax at the rate specified in Division II of Part IV of the First Schedule; that under subsection 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 it by the principal and the principal shall collect advance tax from the agent; and that under subsection 2A, where the principal pays commission to an advertising agent directly or through electronic or print media, the principal deducts tax in addition to that required under clause (b) of subsection (1) of section 153 on advertising services excluding commission, on an amount equal to A multiplied by fifteen and divided by eighty-five, are all taken from that text. No rate is quoted here because rates sit in the First Schedule, commonly differ by filer status, and the published consolidated text predates the Finance Act, 2026. Whether a deduction is adjustable or final in your circumstances depends on provisions we did not read here, so take advice. Nothing here is tax advice.
About the author
Author
Ali Akhtar is a young and curious voice here at Pakistan Era. He is currently pursuing his A-Levels and has a growing interest in Pakistan’s changing industrial landscape and educational trends. Ali likes to write in a way that helps him explain and explore the world around him. His writing reflects the perspective of the new generation navigating the evolving trends of Pakistan where technology, youth innovation, and shifting opportunities are reshaping the country’s future.
