What is the minimum tax rate on turnover: 1%, 1.25% or 1.5%?

What does the law say?

Section 113(2)(b) requires a person within the section to pay “minimum tax computed on the basis of rates as specified in Division IX of Part I of First Schedule”. The rate is therefore whatever the Division IX table says for the year, not a figure written into section 113.

The Division IX table in the Income Tax Ordinance, 2001 amended to 30 June 2026 (tax year 2027) reads:

S. No.	Persons	Minimum tax as % of turnover
1	Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (where annual turnover exceeds rupees one billion); Pakistani International Airlines Corporation; poultry industry including poultry breeding, broiler production, egg production and poultry feed production	0.75%
2	Oil refineries; motorcycle dealers registered under the Sales Tax Act, 1990; oil marketing companies	0.5%
3	Petroleum agents and distributors registered under the Sales Tax Act, 1990; rice mills and dealers; Tier-1 retailers of fast moving consumer goods integrated with the Board’s computerized system for real time reporting of sales and receipts; turnover from supplies through e-commerce, including from running an online marketplace; persons engaged in the sale and purchase of used vehicles; flour mills	0.25%
4	In all other cases	1.25%

Serial 3 used to open with “(a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes”. A footnote records that the Finance Act, 2026 omitted that entry.

Are there reduced rates outside Division IX?

Yes. Part II of the Second Schedule contains reductions:

• Clause (24D) sets minimum tax under section 113(1) at 0.5% for distributors, dealers, sub-dealers and wholesalers of the goods in its table, on condition that they appear on the active taxpayers’ lists under the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001. The goods listed are pharmaceuticals, fertilizer, cigarettes, sugar, locally manufactured mobile phones, packaged food, electronics, beverages and dairy, and a range of packaged household and personal care products. The Finance Act, 2026 substituted this clause. The earlier version gave 0.25% to a list that also included retailers.
• Clause (28E) sets minimum tax under section 113 at 0.5% for a trader of yarn who is an individual.

Part IV of the Second Schedule also lists persons to whom section 113 does not apply at all.

So where do 1% and 1.5% come from?

Both appear in the official PDF, but only in older wording kept in footnotes:

• 1%. The footnotes to section 113 record that the Finance Act, 2014 replaced “an amount equal to one percent of the person’s turnover for the year” in sub-section (2)(b) with the reference to Division IX rates. They also record that the Finance Act, 2017 replaced the words “one per cent” in sub-section (1).
• 1.5%. A footnote to Division IX says the table was substituted by the Finance Act, 2021 and reproduces the earlier table. In that superseded table, “In all other cases” is 1.5%, with 0.75%, 0.25% and 0.3% for listed sectors.

Neither figure is the current general rate. For tax year 2027 the general rate is 1.25%.

Worked example (illustrative figures)

Four sole proprietors each have turnover of Rs. 200,000,000 and are within section 113:

Business	Rate	Minimum tax
Crockery trader in Hyderabad (all other cases)	1.25%	Rs. 2,500,000
Poultry feed producer in Sheikhupura	0.75%	Rs. 1,500,000
Pharmaceutical distributor in Multan on the active taxpayers’ lists, clause (24D)	0.5%	Rs. 1,000,000
Rice dealer in Gujranwala	0.25%	Rs. 500,000

Arithmetic: Rs. 200,000,000 x 1.25% = Rs. 2,500,000; x 0.75% = Rs. 1,500,000; x 0.5% = Rs. 1,000,000; x 0.25% = Rs. 500,000.

Each pays the minimum tax only if it is higher than normal tax on taxable income. If normal tax is higher, normal tax is paid.

What if my business fits two rows?

Division IX does not say how to split turnover between rows for a person with several activities, apart from serial 3 which speaks of a “person’s turnover from supplies through e-commerce”. The text does not resolve mixed businesses, so the row descriptions have to be read against the actual activity.

Common mistakes

• Quoting 1.5% for tax year 2027. That rate is from the table replaced by the Finance Act, 2021.
• Assuming the pharmaceutical and FMCG distributor 0.25% still applies. The Finance Act, 2026 omitted it from Division IX. Clause (24D) now gives 0.5%, subject to its condition.
• Applying any rate below Rs. 100 million of turnover. For an individual, section 113 does not apply below that turnover.

What to check in the official text

Read the Division IX table and its footnotes in the official PDF amended to 30 June 2026, and clauses (24D) and (28E) of Part II and the section 113 clauses of Part IV of the Second Schedule. Our site copy of the Ordinance leaves out tables. Also read section 113, including the definition of turnover in sub-section (3).