How Tax on Bonus Shares Works in Pakistan: 10% Is Withheld Before You Get Them

When a company gives you bonus shares, tax comes out of them first. Section 236Z of the Income Tax Ordinance makes the company withhold 10 per cent of the bonus shares, or collect the tax in cash. FBR's rate card shows 20 per cent for shareholders who are not on the Active Taxpayers List. The tax is final.

Bonus shares feel free, and that is why the tax surprises people. You hold 1,000 shares, the company announces a bonus, and fewer shares than expected land in your account. We read the Income Tax Ordinance, 2001 and FBR's withholding rate card on 15 October 2026 to see exactly how the deduction works.

The company withholds 10 per cent of your bonus shares before issuing them

Under section 236Z, every company issuing bonus shares must withhold ten per cent of the shares due to each shareholder. Withheld shares go to you only if you pay the tax in cash. The Ordinance applies this to listed and unlisted companies alike.

The rule is different from dividend tax. A dividend is cash, so the company simply deducts a share of it. A bonus share is not cash, so the law lets the company hold back shares until the tax is settled. The tax on dividends from PSX companies works on the cash payout instead.

Shareholders who are not on the Active Taxpayers List pay 20 per cent

FBR's withholding rate card for tax year 2027 lists bonus shares at 10 per cent for a person on the Active Taxpayers List and 20 per cent for one who is not. The rate card gives the doubling as a column, and the statute works through the Tenth Schedule.

Section 236Z itself prints only the figure of ten per cent. The doubling for people off the list comes from rule 1 of the Tenth Schedule, which raises the rate of tax collected by 100 per cent. Because of this, your filer status decides how much you keep.

To see where you stand, check your filer status with one SMS. The Active Taxpayers List after the 15 October deadline shows who is still on it.

The company deposits the tax within 15 days of book closure

The company must deposit the tax within fifteen days of the closure of its books. It must do so even if it has not yet collected the money from you. Book closure is the date the company fixes to decide who is on its share register.

For a listed company, the value used is the day-end price on the first day of closure of books. For other companies the value is the one prescribed. The company may collect the tax from you before it issues the shares.

A worked example shows what you receive

Say you are due 100 bonus shares and the day-end price on the first day of book closure is Rs 200. The value is Rs 20,000. At 10 per cent, the tax is Rs 2,000. These numbers are our own arithmetic, not an FBR example.

1. Multiply the bonus shares due by the day-end price: 100 x Rs 200 = Rs 20,000.
2. Apply the rate for your status: 10 per cent gives Rs 2,000 and 20 per cent gives Rs 4,000.
3. Decide whether to pay that tax in cash to the company.
4. If you pay, you receive all 100 shares.
5. If you do not pay, the company can sell the withheld shares to cover the tax.

The Ordinance says the company may sell the shares to the extent it has paid tax for you. It does not say the sale price must match the day-end price. Paying in cash is the way to keep every share.

The tax is final, so it is not added to your other income

Section 236Z(7) says tax paid under this section is final tax on the income from bonus shares. Section 39 treats the issue of bonus shares as income from other sources. The Ordinance deems the tax collected to be paid on your behalf.

Final tax means the deduction settles the tax on that income. We did not check how the return form asks you to show it, so follow the form or your accountant. If you have not filed yet, the steps to file an income tax return still apply.

Common questions about tax on bonus shares

Is tax charged on bonus shares in Pakistan?

Yes. Section 236Z makes the company withhold ten per cent of the bonus shares, or collect the tax in cash, before the shares reach you.

What if I am not a filer?

FBR's rate card shows 20 per cent for a person not on the Active Taxpayers List, double the 10 per cent rate. Check your status before the book closure date.

Do I get the withheld shares back?

Yes, if you pay the tax in cash. If you neither pay nor collect the shares within fifteen days of issue, the company may sell them to cover the tax.

Is the tax adjustable against my other tax?

No. Section 236Z(7) makes it a final tax on the income from bonus shares, so you cannot adjust it against other tax.

Does a mutual fund bonus unit pay the same tax?

The Ordinance defines bonus shares to include bonus units in a unit trust. We did not check how a fund applies the rate, so ask the fund for its tax statement.

When is the value of the shares fixed?

For a listed company, on the day-end price on the first day of closure of books. For other companies, the value is the one prescribed.

How we verified this

What we checked, where we read it, and what we could not confirm.

Last checked 15 October 2026. The legal text of sections 39 and 236Z and the Tenth Schedule comes from the Income Tax Ordinance, 2001 on FBR's site. The 10 and 20 per cent rates come from FBR's Withholding Income Tax Rate Card, updated to 30 June 2026. The worked example is our own arithmetic. We did not receive a bonus issue to test the deduction, and the rate card says the Ordinance prevails if the two differ.