Is the tax deducted on my online sales a final tax, and when can it be adjusted instead?

For most online sellers the tax taken by the courier or payment intermediary is the end of the income tax on those receipts. The Ordinance sets one exception by size and one choice for smaller sellers. Which of the three positions you are in depends on turnover and, for smaller sellers, on a decision made when the return is filed.

What does the law say?

The default: final tax. Section 8(1) of the Income Tax Ordinance lists the taxes that are final, and section 6A is on the list. For those taxes, section 8(1) says:

• the amount is not chargeable to tax under any head of income in computing taxable income;
• no deduction is allowed for any expenditure incurred in deriving it;
• the amount is not reduced by any deductible allowance or the set off of any loss;
• the tax is not reduced by any tax credits; and
• under section 8(1)(e)(ii), the liability is discharged to the extent the tax has been deducted at source under Division III of Part V of Chapter X, the part of the Ordinance that contains the courier and payment intermediary deduction.

The exception: over Rs. 200 million. Section 6A(3) starts “Notwithstanding the provisions of section 8” and says the tax on a person “whose turnover in a tax year exceeds two hundred million rupees, shall be adjustable”.

The choice: up to Rs. 200 million. The proviso to section 6A(3) says a person “having turnover up to two hundred million rupees may opt out of the final tax regime at the time of filing of return for the tax year 2027 and onwards”.

What “turnover” means. Section 2(70A) defines turnover by reference to sub-section (3) of section 113. An Explanation in section 113 says the definition “covers receipts from all business activities”. So the Rs. 200 million test looks at your total business turnover, not only your online sales.

How does it work in practice?

Turnover in the tax year	Treatment of the section 6A tax	What it means
Up to Rs. 200 million, no opt-out	Final under section 8	Online receipts stay out of taxable income; costs cannot be deducted against them
Up to Rs. 200 million, opted out at filing (tax year 2027 onwards)	Out of the final tax regime	The proviso does not itself spell out the computation that follows
Above Rs. 200 million	Adjustable under section 6A(3)	Online receipts are part of the normal computation, and the tax deducted counts towards the tax due

Where the tax is not final, section 168(2) allows a person a tax credit for tax deducted from a payment under Division III of Part V of Chapter X in computing the tax due for the year in which it was deducted.

The main reason a seller might prefer the adjustable route is costs. Under the final regime, section 8(1)(b) bars any deduction for expenses. A seller with thin margins, or a loss, still bears the full 1% or 2% on gross receipts. Outside the final regime, the online business is taxed on income, and the tax deducted goes towards that.

Worked example (illustrative figures)

Two sellers in Lahore, tax year 2027.

Zainab, turnover Rs. 30,000,000, all online.

1. Cash on delivery sales: Rs. 20,000,000 x 2% = Rs. 400,000 deducted by couriers.
2. Card and wallet sales: Rs. 10,000,000 x 1% = Rs. 100,000 deducted by payment intermediaries.
3. Total deducted: Rs. 400,000 + Rs. 100,000 = Rs. 500,000.
4. Turnover is under Rs. 200 million. If she does not opt out, section 8 makes Rs. 500,000 her final tax on these receipts. Her costs do not reduce it.
5. If she opts out when filing, the final regime no longer applies. Her tax would be worked out on her income under the normal rules, which this page does not compute.

Faisal, turnover Rs. 250,000,000, all online by card.

1. Deducted: Rs. 250,000,000 x 1% = Rs. 2,500,000.
2. Turnover exceeds Rs. 200 million, so section 6A(3) makes the Rs. 2,500,000 adjustable.
3. His business income is computed under the normal rules, and the Rs. 2,500,000 is taken into account against the tax due. Whether he then pays more or is owed a refund depends on that computation.

What if …?

What if part of my turnover is from a physical shop? Section 113(3), as explained, covers receipts from all business activities, so shop sales count towards the Rs. 200 million test.

What if my turnover crosses Rs. 200 million only in a later year? Section 6A(3) looks at turnover “in a tax year”, so the test is applied year by year.

What if some of my online sales were never taxed at source? Section 8(1)(e)(ii) discharges the liability only “to the extent” tax has been deducted at source. Sales paid directly to you, without a courier or intermediary, are covered on a separate page.

Common mistakes

• Deducting expenses against final-tax receipts. Section 8(1)(b) does not allow it.
• Counting only online sales towards Rs. 200 million. Turnover is defined through section 113(3), which covers all business receipts.
• Treating the opt-out as available for earlier years. The proviso applies from tax year 2027 onwards.

What to check in the official text

Read section 6A(3) and its proviso with section 8(1), then section 168(2) for credits where the tax is not final. Check the definition of turnover in section 2(70A) and section 113(3). Any Board procedure for recording the opt-out in the return is not held in this corpus.