Glossary · Regulation & Institutions
Withholding Tax
A tax deducted at source on dividends and other income in Pakistan. For tax filers, the withholding tax on dividends from listed companies is currently 15%. Non-filers face a higher rate.
01—What is Withholding Tax?
The definition — and what it means in practice.
Withholding tax is a tax deducted at source from certain types of income in Pakistan, before the investor receives the payment. In listed equities, it commonly applies to cash dividends: the company (or its paying agent) deducts the tax and pays you the net dividend. The applicable rate depends on your tax status, such as whether you are an income-tax filer or a non-filer.
For investors, withholding tax directly affects the cash you actually receive from dividend-paying shares and the after-tax dividend yield you calculate. It also influences record-keeping, because the deduction happens automatically rather than being paid separately later. Comparing dividend income across companies makes more sense on a net basis, especially if your filer status changes or if you hold multiple dividend-paying stocks.
If a PSX company declares a Rs 10 dividend per share, a filer receives Rs 8.50 after 15% withholding tax (a non-filer receives Rs 7.00 after 30%).
- Withholding tax is deducted automatically before a dividend is paid to you.
- On PSX cash dividends, filers face 15% withholding tax; non-filers face 30%.
- It reduces your net dividend and your effective dividend yield.
- The deduction is applied at payment, so you receive the net amount in your account.
02—How withholding tax works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), investors most commonly encounter withholding tax when a listed company pays a cash dividend. Dividends are often declared as a percentage of face value, and most listed shares have a Rs 10 face value (so a “100%” dividend means Rs 10 per share). The withholding tax is deducted from that cash dividend before the net amount is credited to the shareholder.
In practice, the key PSX-specific point is the filer versus non-filer rate difference on cash dividends: 15% for income-tax filers and 30% for non-filers. This means two investors holding the same shares for the same dividend can receive different net cash amounts. When you track income from dividends, use the net figure actually received rather than the declared (gross) dividend.
03—Common misconceptions
Where investors most often get this wrong.
Withholding tax is an extra fee charged by the broker.
It is a government tax deducted at source on income such as dividends. The deduction is applied before you receive the dividend, not as a brokerage commission.
Everyone pays the same withholding tax on PSX dividends.
Rates differ by tax status. In Pakistan, withholding tax on cash dividends is 15% for income-tax filers and 30% for non-filers.
Dividend yield is always based on the declared dividend amount.
Declared dividends are gross. Your realised cash return is based on the net dividend after withholding tax, which can materially change the effective yield.
04—Using withholding tax on BSL
Where this term shows up across the platform — with live data.
- Check upcoming dividend timelines using Ex-Dates.
- Compare dividend payers on a net-thinking basis with Highest Dividend Yield.
- Review dividend-paying stocks and their market data on Stocks.
- Filter for dividend-focused ideas using the Stock Screener.
05—Frequently asked questions
What investors ask about withholding tax on the PSX.
Frequently Asked Questions
It is tax deducted at source from cash dividends before the investor receives the payment. For dividends from listed companies, the deduction is applied automatically and the investor receives the net dividend.
Withholding tax on cash dividends from listed companies is 15% for income-tax filers and 30% for non-filers.
Before. The tax is deducted at source, so the amount credited to you is the net dividend after withholding tax.
Yes. Dividend yield based on the declared dividend is a gross figure. Your effective cash yield is based on the net dividend received after withholding tax, which depends on filer status.
No. Withholding tax discussed here relates to cash dividends. Capital gains tax is a separate tax on profits from selling shares, and it depends on factors such as holding period and filer status.
06—Related terms
Keep building the picture.
A direct payment made by a company to its shareholders, usually from profits, expressed as a rupee amount per share. Subject to withholding tax in Pakistan.
A portion of a company's profits distributed to shareholders. Can be in the form of cash, bonus shares, or a combination of both.
Annual dividend per share divided by the current share price, expressed as a percentage. A useful metric for income-focused investors is to compare dividend yields across different stocks.
A tax levied on profits from the sale of securities. In Pakistan, CGT on listed securities is calculated based on the length of time the shares were held. For instance, shorter holding periods attract higher rates. Filers and non-filers are taxed at different rates.
The cutoff date set by a company to determine which shareholders are officially registered and therefore entitled to receive a declared dividend or corporate action benefit. Distinct from the payout date, which is when the distribution is actually made.
The cutoff date for determining which shareholders are eligible to receive a declared dividend. Investors who buy shares on or after the ex-dividend date do not receive that particular dividend.
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