ISLAMABAD: Withholding tax collection from contracts remained the largest contributor in FY2025, increasing by 37% to Rs728 billion compared to Rs531 billion in the previous year, according to Federal Board of Revenue (FBR) data.
The increase was linked to higher public sector development activity and expansion in infrastructure-related contracts, along with the impact of inflation on transaction values.
Overall withholding tax collection stood at Rs3,371.9 billion during FY2025, marking a growth of 23.1%. Despite this increase, its share in total direct taxes declined from 59.8% in FY2024 to 58.2% in FY2025.
Tax collected from salaries was the second-largest source and recorded the highest growth among major categories, rising by 54.7% during the year. The increase was attributed to higher tax rates, rising income levels, and broader documentation of salaried individuals.
Withholding tax on bank interest and securities ranked third but declined by 1.6%, with collections recorded at Rs475 billion compared to Rs483 billion in the previous year. The drop was associated with lower interest rates.
Imports were the fourth-largest contributor, with collections increasing by 10.9% during FY2025, supported by higher import volumes, enforcement measures and policy adjustments.
Tax collected on dividends grew by 12.4% compared to the previous year, while withholding tax on electricity consumption increased by 11.2%, lower than the 32% growth recorded earlier. The slower growth in electricity-related collections was linked to base effects and increased adoption of alternative energy sources.
Other withholding tax heads also recorded increases, with collections under sections 154, 236, 236C and 236K rising by 25.1%, 24.1%, 22.1% and 14.0%, respectively.
