Payment of royalty to resident persons Section 153B

Payment of Royalty to resident persons Section 153B

Payment of royalty to resident persons [Section 153B & Division IIIB of Part Ill of the First Schedule]

Payment of royalty to resident persons Section 153B: Income from royalty is chargeable to tax under the head, “Income from other sources”. However, in case of non-residents receiving Pakistan source royalty tax is separately imposed at the rate specified in Division IV of Part 1 of the First Schedule which is 15% of the gross amount of royalty.

In the case of resident persons, income from royalty is made part of taxable income and taxed at the rates provided in Division I or 11 of Part I of the First Schedule.

Prior to the Finance Act, 2019, there was no withholding tax on payment of royalty to resident persons. A new section 153B has been introduced through the Finance Act, 2019 which requires every person paying royalty to a resident person to deduct tax at the rate of 15% of the gross amount payable.

The tax deductible shall be adjustable against the income of the recipient of royalty.

These explanations have been issued by FBR after the Finance Act 2019 approved / passed from the parliament of Pakistan.

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