Final Tax vs Adjustable Tax in Pakistan: Bank Profit, Dividends and Capital Gains in Your FBR Return
Which deductions close the matter, which are only a payment on account, and exactly where each receipt belongs in the IRIS return. Written for Tax Year 2026 (1st July 2025 to 30th June 2026) filings, with the Finance Act, 2026 changes that apply from Tax Year 2027 (1st July 2026 to 30th June 2027).
Key points
- Tax deducted at source is either final, minimum or adjustable. Only adjustable tax can be refunded.
- Bank profit up to Rs. 5 million for an individual or AOP is final tax under section 7B. Above Rs. 5 million it becomes normal income and the deduction turns into minimum tax.
- Dividends are always final tax under section 5, but there are nine different rates and a mutual fund distribution can carry two of them at once.
- Capital gain on shares is not final tax. It is a separate block under section 37A, and excess collected by NCCPL is refundable.
- Section 236C on a property sale is adjustable, not final. Many sellers are owed a refund they never claim.
- Final tax income must still be declared in the return and must still reconcile in the wealth statement.
On this page
- Final tax, minimum tax and adjustable tax: what is the difference?
- Tax on bank profit in Pakistan (profit on debt)
- Dividend tax rates in Pakistan
- Capital gains tax on shares and securities
- Capital gains tax on immovable property
- Where each receipt goes in the IRIS return
- What the Finance Act, 2026 changed
- Eight mistakes we see every filing season
- Frequently asked questions
By the time a saver sits down to file, most of the tax on his investment income is already gone. The bank deducted before it credited profit. The company deducted before the dividend warrant was posted. NCCPL collected on share gains month by month, quietly, through the broker, without anybody being asked for a signature.
So the question we hear every September is fair enough: if the money has already been taken, why does any of it need to go into the return?
Because deduction and settlement are two different things. On some receipts the deduction closes the matter for good. On others it is only a payment on account, and the real bill is worked out later at slab rates. On a third category it is neither. It is a floor, and you can end up paying more but never less. Put a receipt in the wrong bucket and you either hand FBR money you did not owe, or you leave a demand sitting in the system waiting for a notice under section 122.
Final tax, minimum tax and adjustable tax: what is the difference?
Every rupee of tax deducted at source in Pakistan carries one of three characters. The Ordinance does not use a single word for this, but in practice it comes down to how the deduction interacts with your final computation.
| Character | What it means | Refundable? | Enters taxable income? |
|---|---|---|---|
| Final | The deduction is the whole tax on that receipt. Nothing more is payable and nothing is recoverable. | No | No. It sits in a separate block outside taxable income. |
| Minimum | Tax is computed normally, but the amount already deducted is the floor. If normal tax is higher you pay the difference. If it is lower, the deduction stands. | No, not to the extent of the floor | Yes, under the relevant head |
| Adjustable | A pure payment on account. Credited against tax computed on the return, and any excess is refundable. | Yes | Yes, under the relevant head |
The machinery sits in section 8 read with section 169 of the Income Tax Ordinance, 2001. Where a receipt is charged under sections 5, 6, 7 or 7B, section 8 says the amount is not chargeable under any head of income, no deduction is allowed for expenditure incurred in earning it, no loss can be set off against it, and no tax credit is allowed except as specifically provided. That is what final tax actually means. It is not merely that the tax is settled. The income is walled off from the rest of your computation.
The point most people miss: final tax income still has to be declared. Section 8 removes it from taxable income. It does not remove it from the return. It is reported in the block for final and fixed tax, and the money must also appear in the wealth statement and survive the reconciliation under section 116. A client who received Rs. 900,000 of bank profit and declared nothing has an unexplained inflow of Rs. 900,000, and the bank’s own data is now being cross-matched against it.
Tax on bank profit in Pakistan (profit on debt)
Profit on debt is the label the Ordinance uses for what everyone else calls markup, yield or interest: profit on a savings or term deposit, yield on National Savings certificates, return on government securities, and profit on bonds, TFCs and debentures.
Two sections do the work. Section 151 requires the payer to deduct at the time the profit is credited or paid, whichever is earlier, on the gross amount reduced by any Zakat deducted under the Zakat and Ushr Ordinance, 1980. Section 7B imposes the charge on the recipient at the rates in Division IIIA.
Profit on debt tax rates for Tax Year 2026 and Tax Year 2027
| Nature of profit | Tax Year 2026 (1st July 2025 to 30th June 2026) | Tax Year 2027 onwards (1st July 2026 to 30th June 2027) |
|---|---|---|
| Account, deposit or certificate under the National Savings Schemes or a Post Office savings account | 15% / 30% | 15% / 30% |
| Profit or yield on an account or deposit with a banking company or financial institution | 20% / 40% | 20% / 40% |
| Profit on Federal, Provincial or local government securities (other than NSS or Post Office) | Individual 15% / 30% Company or AOP 20% / 40% | Individual 15% / 30% Company or AOP 20% / 40% |
| Profit on a bond, certificate, debenture or similar instrument issued by a bank, financial institution, company or finance society | 15% / 30% | 15% / 30% |
| All other cases | 15% / 30% | 15% / 30% |
The non-ATL column is the ordinary rate increased by 100% under Rule 1 of the Tenth Schedule. It is not a penalty you can argue about later. The bank applies it mechanically on your ATL position of the day.
What is the Rs. 5 million profit on debt limit?
This is where most of the confusion lives, and it has nothing to do with the rate. It decides the character of the tax.
- Individual or AOP, profit on debt up to Rs. 5 million in the tax year: section 7B applies. The section 151 deduction discharges the liability. Final tax, separate block, no refund, no set-off.
- Individual or AOP, profit on debt exceeding Rs. 5 million: section 7B is switched off. The whole amount falls under Income from Other Sources and is taxed at ordinary slab rates along with your other income. Section 151(3) then makes the deduction a minimum tax, not an adjustable one.
- Company: section 7B never applied. The profit is ordinary income and the deduction is fully adjustable and refundable.
The threshold is tested on the aggregate for the year, across every bank and every account. Clients with three or four term deposits at different banks routinely look at each certificate in isolation, see a number below Rs. 5 million, and file on a final tax basis. Add the certificates together and the position can be very different.
Example 1 — bank profit below the threshold
Mr. Aslam, a salaried person, earns salary of Rs. 3,000,000 and bank profit of Rs. 800,000 in Tax Year 2026 (1st July 2025 to 30th June 2026). The bank deducted 20%, being Rs. 160,000.
The profit is under Rs. 5 million, so section 7B governs. Rs. 160,000 is the entire tax on that Rs. 800,000. It is not added to salary, it does not push him into a higher slab, and it cannot be recovered even though his marginal rate on salary is lower than 20%. In the return, the Rs. 800,000 receipt and the Rs. 160,000 tax go into the final and fixed tax block, not the adjustable tax sheet.
Example 2 — bank profit above the threshold, and the bill that follows
Mrs. Nasreen has no other source of income. Her deposits produced profit of Rs. 7,000,000 in Tax Year 2026 (1st July 2025 to 30th June 2026), on which the bank deducted 20%, being Rs. 1,400,000. She assumed the matter was closed.
It was not. Above Rs. 5 million, section 7B falls away and the Rs. 7,000,000 is taxed under Income from Other Sources at the non-salaried slab rates. Tax on Rs. 7,000,000 works out to Rs. 1,610,000 plus 45% of Rs. 1,400,000, being Rs. 2,240,000. Credit is given for the Rs. 1,400,000 already deducted, leaving Rs. 840,000 payable with the return.
Now reverse it. Suppose she also had a business loss and her normal tax on total income came to Rs. 900,000. Because section 151(3) makes the deduction a minimum tax, the Rs. 1,400,000 stands. The Rs. 500,000 difference is not refundable and is not carried anywhere.
Behbood Savings Certificates, Pensioners Benefit Account and Shuhada accounts
These deserve their own paragraph because they are handled wrongly more often than anything else in this area. No withholding is made at source on profit from Behbood Savings Certificates, the Pensioners Benefit Account or the Shuhada Family Welfare Account. The profit is chargeable, but clause (6) of Part III of the Second Schedule caps the tax at 5% of that profit. It is declared as a separate block with the rate reduction applied. The IRIS computation has not always handled this cleanly, and the correct figure sometimes has to be forced through the reduction field rather than left to the system.
Dividend tax rates in Pakistan
Dividends are simpler in structure and messier in detail. Section 5 charges the tax, section 150 requires the paying company, mutual fund or REIT to deduct at source, and section 8 makes it final. This is true for individuals, AOPs and companies alike. The complication is that there is no single dividend rate. There are nine, and the correct one depends on who paid and out of what.
| Source of dividend | Rate | Character |
|---|---|---|
| Independent Power Producers, where the dividend is a pass-through item under an Implementation, Power Purchase or Energy Purchase Agreement reimbursed by CPPA-G | 7.5% / 15% | Final |
| Company that paid no tax itself because of exemption, carried forward business losses or tax credits | 25% / 50% | Final |
| Dividend from a Special Purpose Vehicle received by a REIT scheme | 0% | Final |
| Dividend from a Special Purpose Vehicle received by anyone else | 35% / 70% | Final |
| Real Estate Investment Trust | 15% / 30% | Final |
| Mutual fund, on the portion of income from debt securities — corporate recipient | 29% / 58% | Final |
| Mutual fund, on the portion of income from debt securities — any other recipient | 25% / 50% | Final |
| Mutual fund, on the portion of income from equity investments | 15% / 30% | Final |
| Any other case, including an ordinary listed or unlisted company | 15% / 30% | Final |
The mutual fund split is the part that trips people up. A single distribution from an income or money market fund can carry two different rates, because the fund apportions its distribution between the debt component and the equity component of its average annual investments. The asset management company’s certificate shows the split. Do not average it, and do not put the whole distribution on one line.
Example 3 — two rates, one cheque
Mr. Junaid receives Rs. 500,000 dividend from a listed manufacturing company and Rs. 400,000 from an income fund during Tax Year 2026 (1st July 2025 to 30th June 2026). The AMC certificate shows Rs. 320,000 of the fund distribution as attributable to debt securities and Rs. 80,000 to equities.
| Receipt | Amount (Rs.) | Rate | Tax (Rs.) |
|---|---|---|---|
| Listed company dividend | 500,000 | 15% | 75,000 |
| Fund distribution — debt component | 320,000 | 25% | 80,000 |
| Fund distribution — equity component | 80,000 | 15% | 12,000 |
| Total | 900,000 | — | 167,000 |
Three separate lines in the final tax block, at three separate rates. All of it final, none of it refundable, none of it added to his salary or business income.
Two further points that come up regularly:
- Foreign dividends are not final tax. A dividend from a company outside Pakistan is foreign source income for a resident, taxed under the normal regime, with relief for foreign tax under section 103. It belongs in the foreign sources section, not the dividend block.
- Bonus shares are a separate matter. They are dealt with under their own collection provision at the time of issue and are not reported as a dividend receipt on the section 150 lines.
Capital gains tax on shares and securities in Pakistan
Here the label final tax gets used loosely in conversation, and it is wrong. Capital gain on the disposal of securities is charged under section 37A at the rates in Division VII. It is a separate block, taxed at its own rates, but it is not final tax under section 8. NCCPL computes, determines, collects and deposits the tax under section 100B read with the Eighth Schedule, and issues an annual certificate treated as conclusive evidence of the gain. What NCCPL collects is credited against the liability for that block, and any excess is genuinely refundable.
| When the security was acquired | Rate |
|---|---|
| Before 1st July 2013 | 0% |
| 1st July 2013 to 30th June 2022 | 12.5% |
| 1st July 2022 to 30th June 2024 | Holding period based: 15% up to one year, then 12.5%, 10%, 7.5%, 5%, 2.5%, and 0% beyond six years |
| On or after 1st July 2024 | 15% flat, provided the person is on the ATL both on the date of acquisition and on the date of disposal. Otherwise ordinary slab rates for individuals and AOPs, or the corporate rate for companies, subject to a floor of 15% for individuals and AOPs. |
| Future commodity contracts at PMEX | 5% |
| Redemption of units — mutual fund, collective investment scheme or REIT scheme | Individual or AOP: 15%. Company: 15% for stock funds, 25% for other funds. |
The ATL condition on two dates is worth reading twice. A client who bought in March 2025 while off the ATL and sold in April 2026 while on it does not get the 15% rate. Whether a person was an active taxpayer on a date two years ago is not something anyone thinks to check at the time of purchase, and by the time the certificate arrives it is too late to fix.
Capital losses on shares: set-off and carry forward
A capital loss on securities can only be set off against gains on securities in the same block. It cannot touch salary, business or rental income. Unabsorbed loss is carried forward for up to three tax years and is again available only against securities gains. NCCPL applies the brought forward adjustment itself, but only for a person whose name appeared on the ATL for the tax year to which the loss related. Investors who let their filing lapse in a loss year effectively forfeit the carry forward.
Example 4 — how the securities block actually settles
Mr. Faraz, an active taxpayer throughout, trades shares acquired after 1st July 2024. During Tax Year 2026 (1st July 2025 to 30th June 2026) he books gains of Rs. 1,200,000 on one scrip and a loss of Rs. 300,000 on another. He has a brought forward capital loss of Rs. 400,000 from Tax Year 2024 (1st July 2023 to 30th June 2024), a year in which he was on the ATL.
| Gains during the year | 1,200,000 |
| Less: loss during the year | (300,000) |
| Less: brought forward loss | (400,000) |
| Net gain chargeable | 500,000 |
| Tax at 15% | 75,000 |
NCCPL collects month by month on the running net position and refunds the excess through the broker when later losses reduce it. The annual certificate carries the final figure, and that is the figure that goes into the return. If more was collected than the certificate shows as payable, the difference is claimed as a refund. This is precisely what cannot be done with a bank profit or dividend deduction.
Debt securities disposed of off-market
Where debt securities are disposed of otherwise than through a registered stock exchange settled through NCCPL, the custodian of the account, typically the bank maintaining the Investor Portfolio Securities account, deducts under section 151A on the gross gain. The Finance Act, 2026 raised this from 15% to 20% with effect from 1st July 2026, to line it up with the rate on profit on debt. The Act also extended the withholding exemption in clause (47B) of Part IV of the Second Schedule to section 151A, so approved funds, collective investment schemes and REIT schemes are no longer subjected to it.
Capital gains tax on immovable property, and is 236C adjustable?
Property gains sit under section 37(1A) with their own rate table, and the two collection provisions around them are adjustable, not final. This is the single most valuable thing a seller can know.
| Acquired | Rate |
|---|---|
| On or before 30th June 2024 | Holding period based, and different for open plots, constructed property and flats. Open plots run 15% down to 0% beyond six years. Constructed property reaches 0% after four years. Flats reach 0% after two years. |
| On or after 1st July 2024 | 15% flat for a person on the ATL on the date of disposal, regardless of holding period. For a person not on the ATL, ordinary slab or corporate rates apply, with a floor of 15% of the gain for individuals and AOPs. |
Advance tax under section 236C is collected from the seller at the point of transfer, and advance tax under section 236K from the buyer. Both are adjustable. The seller’s 236C is credited against the capital gains liability computed on the return, and if it exceeds that liability the excess is refundable. A seller who never files does not merely lose the refund. He also pays the non-ATL rate at the registry in the first place.
Example 5 — the property refund nobody claims
Mr. Tariq bought a plot in August 2024 for Rs. 10,000,000 and sold it in May 2026 for Rs. 14,000,000. He is an active taxpayer.
Gain is Rs. 4,000,000. As the plot was acquired after 1st July 2024 and he is on the ATL, tax is 15%, being Rs. 600,000. At the registry, advance tax under section 236C was collected on the gross consideration of Rs. 14,000,000 at 4.5%, being Rs. 630,000.
His capital gains liability is Rs. 600,000 and his adjustable credit is Rs. 630,000. He is Rs. 30,000 in refund, or he applies it against other liability on the same return. If he does not file, he simply loses it.
From 1st July 2026 the section 236C rate becomes a single 2.75% for ATL sellers and overseas Pakistanis, and section 236K a single 1.25%, replacing the value based slabs. On the same transaction the advance tax would have been Rs. 385,000, and Mr. Tariq would have had Rs. 215,000 to pay rather than a refund to claim.
Where each receipt goes in the IRIS return
| Receipt | Charging section | Collection | Character | Where it is declared |
|---|---|---|---|---|
| Bank profit up to Rs. 5m | 7B | 151 | Final | Final / fixed tax block |
| Bank profit above Rs. 5m | 39 (Other Sources) | 151 | Minimum | Other Sources, with credit for tax deducted |
| Bank profit, company | Normal regime | 151 | Adjustable | Business income, adjustable tax |
| Behbood / PBA / Shuhada profit | Normal, capped at 5% | No deduction | Reduced rate block | Separate block with rate reduction |
| Dividend | 5 | 150 | Final | Final / fixed tax block, one line per rate |
| Foreign dividend | Normal regime | None in Pakistan | Adjustable, with s.103 relief | Foreign sources |
| Capital gain, listed securities | 37A | 100B / NCCPL | Separate block, collection adjustable within the block | Capital Assets, per NCCPL certificate |
| Capital gain, debt securities off-market | 37A | 151A | Separate block | Capital Assets |
| Capital gain, immovable property | 37(1A) | 236C on seller | Separate block, 236C adjustable | Capital Assets, 236C in adjustable tax |
Practical notes on the tabs themselves. Final tax receipts and their deductions go in the Final / Fixed / Minimum / Average / Relevant / Reduced Tax tab, one line per rate, gross receipt in one column and tax deducted in the other. Adjustable deductions such as section 236C go in the Adjustable Tax tab. Capital gains, whether on securities or property, are entered under Capital Assets in the income section. In every case the net amount received flows into the wealth statement and has to reconcile.
What the Finance Act, 2026 changed
The Finance Act, 2026 was passed by the National Assembly on 26th June 2026 and enacted on 27th June 2026, with effect from 1st July 2026 unless otherwise provided. It does not disturb the return you are filing now for Tax Year 2026 (1st July 2025 to 30th June 2026). It matters for the year that has already started.
| Amendment | Effect |
|---|---|
| Section 151A rate raised | Withholding on gain from disposal of certain debt securities by a custodian, including a bank maintaining an IPS account, goes from 15% to 20%, aligning it with the profit on debt rate. |
| Tenth Schedule, sub-rule (y) omitted | The carve-out that kept section 37A collections outside the non-ATL regime is gone. Tax collected under section 37A on a person not on the ATL is increased by 100%. |
| Rule 5 of the Eighth Schedule omitted | The option to opt out of the NCCPL computation and collection regime, with the Commissioner’s approval, no longer exists. Everyone within section 37A is inside the NCCPL system. |
| Scope of NCCPL collection widened | Non-banking finance companies, modarabas and companies in respect of debt securities are brought in. For banking companies, insurance companies and mutual funds, NCCPL computes the gain while the entity itself deposits the tax. |
| Division VII, third proviso amended | Puts beyond argument that the amount deducted by a mutual fund, collective investment scheme or REIT scheme on redemption is the tax charge on that gain, not merely advance tax. |
| Section 7E omitted | The tax on deemed rental income from immovable property is gone, following the Federal Constitutional Court’s order of 6th May 2026 holding it ultra vires. The Act contains no mechanism for automatic refund of amounts already paid. |
| Sections 236C and 236K flattened | Single rate of 2.75% on sale and 1.25% on purchase, irrespective of value. The late filer category in Rule 1A of the Tenth Schedule is abolished, so a late filer now pays the same rates as a timely filer. |
| Cost of inherited property fixed | The cost of immovable property acquired by inheritance is its fair market value on the date of transfer to the beneficiary. Transmission on death expressly includes a family settlement among legal heirs following that death. |
| Super tax rationalised | For persons other than banks, Fifth Schedule cases and fertiliser sellers, super tax under section 4C applies only where income exceeds Rs. 500 million, at 8%. The graduated slabs from Rs. 150 million are gone for everybody else. |
| Bank reporting to the Central Data Hub | Banks and electronic money institutions must upload deposits, withdrawals, opening and closing balances, peak credits and total credits for account holders whose aggregate deposits or withdrawals cross Rs. 100 million in a reporting period, for algorithmic cross-matching. |
| New penalty on excess withholding credit | Where a person claims credit for tax withheld in excess of what was verifiably deducted and deposited by the withholding agent, the penalty equals the excess credit claimed. |
That last one deserves emphasis. Claiming a bank deduction from a certificate that the bank never actually deposited is now expensive, and you will not find out until the system flags it. Reconcile every certificate against the FBR portal before the credit is claimed.
Eight mistakes we see every filing season
- Declaring nothing because the tax was already deducted. Final tax income is still declared. Leaving it out creates an unexplained inflow in the wealth reconciliation, which is a far more common trigger for a notice than the tax itself.
- Testing the Rs. 5 million threshold bank by bank. It is the aggregate for the year that counts.
- Entering net figures. Gross receipt in one column, tax deducted in the other. Entering the credited amount understates income and breaks the reconciliation.
- Putting all dividends on one line. Each rate is its own row, and a single mutual fund distribution can occupy two rows.
- Treating section 236C as final. It is adjustable, and on many transactions it exceeds the actual capital gains liability. That refund is only available to a person who files.
- Assuming the NCCPL figure will pull itself in. Obtain the annual certificate and reconcile it. The certificate is conclusive evidence of the gain.
- Ignoring ATL status on the date of acquisition. For securities bought on or after 1st July 2024, being on the ATL at the time of sale alone is not enough.
- Forgetting that final tax income still counts for super tax. Section 4C works on income that includes these blocks.
Frequently asked questions
Do I have to declare bank profit in my income tax return if the bank already deducted tax?
Yes. Section 8 keeps final tax income out of taxable income, but it does not keep it out of the return. The gross profit and the tax deducted are declared in the final and fixed tax block, and the net amount received must appear in the wealth statement and reconcile under section 116. Omitting it creates an unexplained inflow, which is a common reason for a notice.
Is profit on bank deposits final tax in Pakistan?
For an individual or AOP, yes, provided total profit on debt for the year does not exceed Rs. 5 million. In that case section 7B applies and the section 151 deduction is the whole tax. Above Rs. 5 million the profit is taxed under Income from Other Sources at slab rates and the deduction becomes minimum tax. For a company the deduction is adjustable and refundable.
Can I claim a refund of tax deducted on bank profit?
Not where section 7B applies, because it is final tax. Not to the extent of the deduction where profit on debt exceeds Rs. 5 million, because section 151(3) makes it minimum tax. A company can claim a refund because its deduction is adjustable.
What is the dividend tax rate in Pakistan?
Fifteen per cent in the ordinary case, including a listed or unlisted company and a REIT. Independent Power Producer pass-through dividends are 7.5%. Dividends from a company that paid no tax due to exemption, losses or credits are 25%. Dividends from a Special Purpose Vehicle are 35% for a recipient other than a REIT scheme. Mutual fund distributions are split between the debt component, taxed at 29% for a corporate recipient and 25% for anyone else, and the equity component at 15%. Rates double for a person not on the Active Taxpayers List.
Is capital gain on shares final tax in Pakistan?
No. Gain on disposal of securities is charged under section 37A as a separate block at Division VII rates. NCCPL computes and collects the tax, and any excess collected is refundable once the annual NCCPL certificate is reconciled in the return. This is different from bank profit and dividends, where nothing is recoverable.
Is 236C adjustable or final tax?
Adjustable. Advance tax collected from the seller under section 236C is credited against the capital gains liability on the property computed in the return, and any excess is refundable. It is only recoverable by a person who actually files a return.
Which Finance Act applies to the return I am filing now?
The return due now is for Tax Year 2026 (1st July 2025 to 30th June 2026), governed by the law as it stood after the Finance Act, 2025. The Finance Act, 2026 applies to Tax Year 2027 (1st July 2026 to 30th June 2027) and to withholding from 1st July 2026 onwards. Applying next year’s rates to this year’s return is one of the quickest ways to invite an amendment under section 122.
This article is general commentary on the Income Tax Ordinance, 2001 as amended and is not advice on any particular case. Rates and thresholds are drawn from the First and Second Schedules as they stood after the Finance Act, 2026. Positions can change through SROs, circulars and judicial decisions after the date of writing. Please take advice on your own facts before acting.
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