Withholding tax is a crucial mechanism in Pakistan’s tax framework. Under the Income Tax Ordinance, 2001, persons responsible for collecting or deducting tax at source must deposit that amount to the Federal Board of Revenue (FBR) within a prescribed time.
Section 160 outlines the legal obligation to deposit collected or deducted tax under Division II, Division III, or Chapter XII, ensuring accountability and proper revenue flow to the national exchequer.
What Does Section 160 State?
“Any tax that has been collected or purported to be collected under Division II or deducted or purported to be deducted under Division III or under Chapter XII, shall be paid to the Commissioner by the person making the collection or deduction within the time and in the manner as may be prescribed.”
Key Concepts Explained
Who Is This Section Applicable To?
Any withholding agent including:
Employers deducting tax on salaries (Section 149)
Banks deducting tax on profit (Section 151)
Real estate registrars deducting tax on property transfers (Section 236C)
E-commerce platforms or payment intermediaries (Section 153 & 165C)
When Must the Tax Be Deposited?
As per Income Tax Rules, 2002, typically:
Within 7 days after the end of the month in which tax is collected or deducted
Special transactions (e.g., on property) may require same-day deposit
Legal Obligation and Consequences of Delay
Failure to deposit tax timely results in:
Default surcharge under Section 205
Penalties under Section 182
Possible prosecution proceedings under Section 191
Non-compliance can also trigger audit or inquiry by FBR under Section 176 or 177.
Practical Example
Case: ABC Pvt. Ltd. deducts PKR 150,000 as withholding tax on 15th July 2025 under Section 153 for services received from a contractor.
As per rules:
The amount must be deposited on or before 7th August 2025
Deposit must be made using PSID/CPR via FBR’s IRIS portal or 1Link-enabled bank
Failure to deposit on time may result in:
Default surcharge (calculated daily)
Penalty (minimum PKR 10,000 or higher)
Key Compliance Checklist
| Action | Requirement |
|---|---|
| Collect/Deduct Tax | At source (based on nature of transaction) |
| Deposit to FBR | Within prescribed time (usually next month’s 7th) |
| Mode of Payment | PSID/CPR via IRIS or designated banks |
| Filing of Withholding Statement | Quarterly (Section 165/165C) |
| Maintain Record | As per Section 174 |
FAQs – Payment of Collected or Deducted Tax under Section 160
Who must pay tax under Section 160?
Any person who collects or deducts tax at source under the Income Tax Ordinance.What is the deadline to deposit withheld tax?
Generally, by the 7th of the following month.What happens if I deposit late?
Default surcharge and penalty will apply.How is the payment made?
Generate PSID in IRIS and pay via 1Link bank or online banking.Is it enough to deduct tax without depositing?
No. Deposit to FBR is mandatory. Deduction without payment is non-compliance.What is meant by ‘purported to be deducted’?
Even if wrongly deducted, the amount must still be deposited unless refunded.Do e-commerce platforms fall under this section?
Yes, especially after the inclusion of Chapter XII and Section 165C.Can I adjust collected tax later?
Adjustments must follow FBR-prescribed procedures. Do not offset without approval.Can I face legal consequences for non-payment?
Yes. This may lead to prosecution under Section 191.Is there a format or challan for depositing tax?
Yes. Payment is made using PSID/CPR generated in IRIS.
Disclaimer
Disclaimer:
This content is for educational and informational purposes only. It does not constitute legal or financial advice. Please consult a qualified tax advisor or legal professional before taking any action based on this article.
