ATL vs Non-ATL: Tax Rates & Penalties in Pakistan (2026–27)

ATL vs Non-ATL Tax Rates in Pakistan 2026–27: Withholding Tax Differences, Penalties and Financial Consequences

Applicable Period: Tax Year 2027 (1 July 2026 to 30 June 2027)
Governing Law: Income Tax Ordinance, 2001, as amended by the Finance Act, 2026.

1. Introduction

The Federal Board of Revenue (FBR) maintains an Active Taxpayers List (ATL) containing the particulars of taxpayers who have fulfilled the prescribed income tax return filing requirements.

In Pakistan, taxpayers are generally divided into two categories for withholding tax purposes:

• ATL (Active Taxpayer): A person whose name appears on the Active Taxpayers List maintained by FBR.
• Non-ATL (Person not appearing on ATL): A person whose name does not appear on the relevant Active Taxpayers List.

The distinction is financially important because persons who are not appearing on the ATL are generally subjected to higher withholding tax rates on various transactions.

Under the Income Tax Ordinance, 2001, read with the Tenth Schedule and the relevant provisions of the First Schedule, higher rates may apply to non-ATL persons.

The Finance Act, 2026 has prescribed updated withholding tax rates for Tax Year 2027. The following comparative tables explain the principal differences.

2. Comparative Table: ATL vs Non-ATL Withholding Tax Rates (2026–27)

The following rates are based on the FBR Withholding Tax Rate Card for Tax Year 2027, updated under the Finance Act, 2026.

A. Banking and financial transactions

Important: Section 231AB applies to cash withdrawals by persons not appearing on the ATL, subject to the prescribed statutory threshold and conditions.

B. Dividend and investment income

Special dividend categories, mutual funds and REIT distributions may have separate rates.

C. Payments for goods, services and contracts

Special consideration for professional service providers: Independent professional services, including legal services, are specifically covered by the relevant rate category. The applicable treatment should be determined by examining the nature of the service provider, payment and statutory classification.

D. Purchase and sale of immovable property

Property transactions are among the areas where the difference between ATL and Non-ATL status can be particularly substantial.

Advance tax on purchase of immovable property – Section 236K

Advance tax on sale/transfer of immovable property – Section 236C

These are advance tax collection rates and should not be confused with the final capital gains tax liability.

E. Purchase and registration of motor vehicles

Under Section 231B, advance tax is collected at the time of purchase or registration, as applicable.

The applicable collection basis and valuation rules must also be considered.

F. Other important transactions

Note: The above is a selection of commonly encountered transactions, not an exhaustive list of all withholding tax provisions. Certain transactions have special exemptions, thresholds, classifications and conditions.

3. Penalties and Financial Consequences for Non-ATL Taxpayers

Not appearing on the ATL can result in significant financial disadvantages. However, it is important to distinguish between additional withholding tax and penalties for separate statutory defaults.

A person does not automatically become liable to every penalty merely because his name is absent from the ATL.

The following consequences are particularly relevant:

3.1 Higher withholding tax deductions

The principal financial consequence of non-ATL status is the higher rate of withholding or advance tax on applicable transactions.

For example:

• A person earning bank profit may face 40% withholding tax instead of 20%.
• A person purchasing property worth Rs. 40 million may face 10.5% advance tax instead of 1.25%.
• A person selling property may face 11.5% instead of 2.75%.
• A person purchasing a vehicle above 3,000cc may face 36% instead of 12%.

These deductions can create substantial cash-flow difficulties.

3.2 Surcharge for inclusion in ATL after the filing deadline – Section 182A

The Finance Act, 2026 has substantially increased the surcharge payable by late filers seeking inclusion in the ATL.

This surcharge is separate from the penalty for late filing of an income tax return.

Special relief for individuals: Section 182A provides an exception to the surcharge condition for an individual who furnishes an undertaking before the Commissioner that he will not purchase, acquire or otherwise obtain ownership or beneficial interest in any property for six months from the date of furnishing the undertaking, in the prescribed form.

3.3 Penalty for failure to file an income tax return – Section 182

A taxpayer who fails to furnish an income tax return within the prescribed time may be subjected to a penalty under Section 182(1), read with Section 114.

The penalty is determined under the applicable statutory formula, including the daily default calculation, minimum and maximum limits and any applicable reductions for timely filing after the deadline.

The applicable minimum penalty and calculation must be checked against the taxpayer's category and the amended law for the relevant tax year.

3.4 Penalty for failure to file wealth statement – Section 182

Where a taxpayer is required to furnish a wealth statement and wealth reconciliation statement under Section 116 but fails to do so, a penalty may be imposed under Section 182.

The applicable penalty is 0.1% of taxable income per week or Rs. 100,000, whichever is higher, subject to the relevant statutory requirements.

3.5 Penalty for failure to register with FBR – Section 181

A person required to obtain registration under Section 181 but failing to submit the prescribed registration application may face a penalty of Rs. 10,000 under Section 182.

3.6 Penalty for furnishing incorrect or misleading information

A taxpayer who knowingly furnishes false or misleading statements, information or documents to the Inland Revenue authorities may be exposed to penalties under Section 182.

Depending on the nature of the default, penalties may include:

• Monetary penalties for false or misleading statements.
• Penalties for concealment of income or furnishing inaccurate particulars.
• Recovery of tax shortfall.
• Further proceedings under applicable provisions of the Income Tax Ordinance, 2001.

3.7 Default surcharge and recovery proceedings

Where tax remains unpaid or is not deposited within the prescribed time, default surcharge may be imposed under Section 205, in addition to the principal tax liability.

The FBR may also initiate recovery proceedings in accordance with the applicable provisions of the Ordinance.

Important legal distinction: These penalties arise from specific defaults under the law. Mere absence from the ATL does not, by itself, establish concealment of income, tax evasion or criminal liability.

4. Is withholding tax adjustable or refundable?

In many cases, withholding tax collected under the relevant provisions of the Income Tax Ordinance is adjustable against the taxpayer's final income tax liability.

For example, if a taxpayer purchases immovable property and advance tax is collected under Section 236K, the amount may be claimed as tax credit/adjustment where the applicable law permits.

A taxpayer who has paid excess adjustable tax may claim an adjustment or refund through the prescribed return and refund procedures.

However, certain withholding provisions operate under final or separate tax regimes. Therefore, the treatment must be examined provision by provision.

5. How can a taxpayer become an Active Taxpayer?

A person seeking inclusion in the ATL should generally:

1. Obtain an NTN or complete FBR registration.
2. File the applicable income tax return through the IRIS portal.
3. Submit the wealth statement and reconciliation statement, where required.
4. Pay the applicable tax liability.
5. Where the return is filed after the due date, pay the surcharge prescribed under Section 182A, if applicable.
6. Verify ATL status through the FBR's prescribed verification facility.

For a late filer, filing the return alone may not be sufficient for immediate ATL inclusion where the surcharge is applicable.

6. Why should businesses and individuals maintain ATL status?

Maintaining active taxpayer status is important for both individuals and business entities.

The major advantages include:

• Lower withholding tax deductions on applicable transactions.
• Reduced advance tax burden on property transactions.
• Lower tax collection when purchasing or registering vehicles.
• Lower tax deduction on bank profits and dividends.
• Improved tax documentation and financial transparency.
• Easier financial planning and business transactions.
• Better compliance standing with banks, financial institutions and regulatory authorities.

7. Conclusion

The distinction between ATL and Non-ATL status is no longer merely an administrative classification. It has a direct financial impact on property transactions, banking, investments, vehicle purchases, business payments and professional services.

The Finance Act, 2026 has introduced updated withholding tax rates for Tax Year 2027 and increased the surcharge for late filers seeking inclusion in the ATL.

Individuals, companies, partnerships and business owners should therefore ensure timely filing of their income tax returns and maintain accurate financial records to avoid unnecessary withholding tax deductions, statutory penalties and compliance difficulties.

M/s Legal Solutions provides professional tax and corporate advisory services, including income tax return preparation and filing, FBR registration, wealth statement preparation, tax planning, withholding tax advisory, tax notices, appeals, representation and litigation.

For professional assistance, contact M/s Legal Solutions.

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Disclaimer: This article is intended for general informational and educational purposes and does not constitute legal or tax advice. Tax rates and statutory provisions are subject to amendments. The Income Tax Ordinance, 2001, as amended, and the applicable Finance Act shall prevail in case of any inconsistency.