How much income tax is collected through a mill's industrial electricity bill, and can it be adjusted?

Every monthly electricity bill for a mill’s industrial connection carries an income tax line. The Income Tax Ordinance, 2001 sets that charge in section 235 and its rates in the First Schedule, and whether it can later be claimed back depends mainly on whether the mill is run by a company.

What does the law say?

Section 235(1) requires advance tax to be collected at the rates in Division IV of Part IV of the First Schedule on the electricity bill of a commercial, industrial or domestic consumer. Section 235(2) makes the person preparing the bill charge the tax in the same way as the electricity charges. Its Explanation says the bill means the bill “inclusive of sales tax and all incidental charges”.

Paragraph (1) of Division IV sets the rates for commercial and industrial consumers on the gross amount of the bill:

Gross amount of bill	Tax
Up to Rs. 500	Rs. 0
Above Rs. 500, up to Rs. 20,000	10% of the amount
Above Rs. 20,000, industrial consumer	Rs. 1,950 plus 5% of the amount above Rs. 20,000
Above Rs. 20,000, commercial consumer	Rs. 1,950 plus 12% of the amount above Rs. 20,000

The middle row reads “10% of the amount” and the table does not say whether that means the whole bill or the part above Rs. 500. A mill’s industrial bill will usually be well above Rs. 20,000, where the last rows apply.

Can the tax be adjusted?

Section 235(4) splits taxpayers in two:

• Companies. Clause (c): tax collected is adjustable against tax liability.
• Others (individuals and associations of persons). Clause (a): tax collected up to a bill amount of Rs. 360,000 per annum is minimum tax, and no refund is allowed. Clause (b): tax collected on a monthly bill over and above Rs. 30,000 per month is adjustable.

Section 235(4) does not set out the arithmetic for splitting the tax on a single large bill between the minimum and adjustable parts. This page does not supply one.

Worked example (illustrative figures)

A weaving unit in Faisalabad receives an industrial electricity bill for October 2026 of Rs. 1,500,000, including sales tax and all incidental charges.

1. Amount above Rs. 20,000: Rs. 1,500,000 - Rs. 20,000 = Rs. 1,480,000.
2. 5 percent of that: Rs. 1,480,000 x 5 percent = Rs. 74,000.
3. Add the fixed amount: Rs. 1,950 + Rs. 74,000 = Rs. 75,950.

The income tax on this bill is Rs. 75,950. If the unit is run by a company, section 235(4)(c) makes the Rs. 75,950 adjustable against its tax liability for the year. If it is run by a partnership or a sole owner, part of the tax is minimum tax under section 235(4)(a) and the rest adjustable under section 235(4)(b).

What if the mill holds a certificate?

Section 235(3) says the tax is not collected from a person who produces a Commissioner’s certificate that the person’s income for the tax year is exempt, that advance tax liability under section 147 has been discharged, or that the person’s entire income is subject to the final or minimum tax regime under another provision.

Section 159(1) separately allows exemption or lower rate certificates for amounts to which Chapter XII applies, and section 235 sits in Chapter XII. Section 159(2) makes the person collecting the tax take the full amount unless such a certificate is in force.

What if the owner is not on the active taxpayers’ list?

The proviso to section 235(1) that switches off collection for people on the active taxpayers’ list covers domestic consumers only. It does not apply to industrial connections.

Rule 1 of the Tenth Schedule increases by one hundred percent the rate of tax to be deducted or collected under any provision of the Ordinance from persons not appearing in the active taxpayers’ list. Its text is general and does not exclude section 235. How electricity distribution companies apply it on industrial bills is not set out in this corpus.

Common mistakes

• Working out the tax on the bill before sales tax. The Explanation to section 235(2) uses the bill inclusive of sales tax and incidental charges.
• Assuming all of it is refundable for a sole proprietor. Section 235(4)(a) treats the part up to Rs. 360,000 of bills a year as minimum tax with no refund.
• Using the commercial rate for a factory. Industrial consumers pay 5 percent above Rs. 20,000, not 12 percent.

What to check in the official text

• Section 235(1) to (4) of the Income Tax Ordinance, 2001, as amended to 30 June 2026.
• Paragraph (1) of Division IV of Part IV of the First Schedule, including the wording of the middle row.
• Section 159 on certificates for Chapter XII collections.
• Sales tax on the electricity bill itself, and input tax on it, is covered on the related sales tax input page.