Contract tax calculator

The withholding tax on contracts for tax year 2027 (1 July 2026 to 30 June 2027) is 7.5% of the gross bill for a company and 8% for an individual or a firm (AOP) on the FBR's Active Taxpayers List, under section 153(1)(c). Off the list it doubles, to 15% and 16%. Bills for services fall under section 153(1)(b): 7% for the services on its list, such as building maintenance, engineering and manpower, 15% for a professional working alone and 14% for other services. The Finance Act 2026 raised the listed services' rate from 6% to 7% and cut other services from 15% to 14%; the rates on contracts have not changed since the Finance Act 2023.

The payer deducts the withholding tax, which is income tax, from the whole bill, sales tax included. Take a firm on the ATL billing a company Rs 50 lakh of building work in Punjab: PRA sales tax at 16% makes the bill Rs 5,800,000, and 8% of that is Rs 464,000. The company also withholds the Rs 800,000 sales tax, as PRA's rules require from a contractor that is not a company, so the cheque is Rs 4,536,000. Off the ATL the income tax would be Rs 928,000. Were the contractor a company on PRA's active list, the income tax would be Rs 435,000, only Rs 160,000 of the sales tax would be withheld, and the cheque would be Rs 5,205,000, with Rs 640,000 of it sales tax to deposit.

A minimum tax, for tax year 2027 (section 153(3)). It was a final tax on contracts until the Finance Act 2019 changed it from tax year 2020. You still file a return and declare the income: if the tax on your profit at the normal rates comes to more than was deducted, you pay the difference, and if it comes to less, the deduction stands and is not refunded. The one exception is a works contract of a public company listed on the stock exchange, where the tax deducted is adjustable, like any advance tax. Because the tax is a minimum tax, a contractor cannot get a reduced rate certificate for it: section 153(4) allows one only where the tax is not a minimum tax.

Yes. Section 153(1) says the payer deducts the tax from the gross amount payable, including sales tax, if any, so it is worked out on the whole bill. On a Rs 50 lakh bill with 16% sales tax on it, 8% income tax is Rs 464,000, not the Rs 400,000 it would be on the work alone.

As of September 2026: Punjab (PRA) 16% with input tax, 5% on government civil works; Sindh (SRB) 15% with input tax, 5% on government civil works; Khyber Pakhtunkhwa (KPRA) 5% without input tax, 4% on government funded projects; Balochistan (BRA) 8% without input tax, 1% on government civil works; Islamabad (FBR) 15% with input tax, government civil works left out. Sindh's option to pay 8% on construction ended on 1 July 2026, and Khyber Pakhtunkhwa keeps 2% for ADP projects approved from July 2021 to June 2025. Property developers and builders selling their own projects pay fixed amounts per square yard of land and per square foot of building instead.

It depends on the province. Punjab: the whole tax on a registered contractor's invoice, except that a company paying a company on PRA's active list withholds 20%. Sindh: a government office four-fifths and a company one-fifth, and the whole of the reduced-rate tax on government civil works. Khyber Pakhtunkhwa: the whole, as construction is taxed below the standard rate, and on anything a government body pays for. Balochistan and Islamabad: one-fifth. From a contractor who is not registered, or not on the authority's active list, the payer takes the whole tax, except that a company in Islamabad takes 5% of the bill. Whatever is not withheld, the contractor deposits with his own return.

Not on one house. Punjab's law leaves out residential construction where the covered area is up to 10,000 sq ft for a house or 20,000 sq ft for a block of flats, unless the contract covers more than one house or building. Islamabad has the same rule, and also leaves out industrial and commercial jobs worth up to Rs 50 million a year. Sindh, Khyber Pakhtunkhwa and Balochistan tax a contractor's work on a house like any other construction, although Khyber Pakhtunkhwa does not tax a family building its own house itself. The contractor's income tax is a separate matter: a family does not deduct it, but the contractor pays it with his return.

Usually not. Only a prescribed person deducts under section 153: government, companies, associations of persons set up by law, non-profit organisations, foreign contractors, joint ventures, builders and developers, and individuals and firms with a turnover of Rs 10 crore or more in an earlier year. A family paying a contractor to build its house is none of these, and it is not a sales tax withholding agent either, so the contractor is paid the whole bill and pays the taxes himself: the income tax with his income tax return, and any sales tax with his sales tax return.