Who has to deduct tax when paying a professional's fee, and does a patient or individual client have to?

The duty to deduct tax from a professional fee depends on who is paying, not on who is being paid. Section 153 of the Income Tax Ordinance places the obligation on a defined list of “prescribed persons”. A doctor or lawyer can therefore have tax taken from one client’s payment and nothing taken from the next, and both clients can be acting correctly.

What does the law say?

Section 153(1)(b) requires “every prescribed person” making a payment “for the rendering of or providing of services” to a resident person to deduct tax from the gross amount payable. The duty applies “except where payment is less than thirty thousand Rupees in aggregate, during a financial year”.

Section 153(7)(ii) confirms that “services” includes “the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee”.

Section 153(7)(i) defines “prescribed person” as:

Clause	Prescribed person
(a)	the Federal Government
(b)	a company
(c)	an association of persons constituted by, or under law
(d)	a non-profit organization
(e)	a foreign contractor or consultant
(f)	a consortium or joint venture
(g)	an exporter or export house, for sub-section (2) only
(h)	an association of persons with turnover of one hundred million rupees or above in any of the preceding tax years
(i)	an individual with turnover of one hundred million rupees or above in any of the preceding tax years
(j)	a person registered under the Sales Tax Act, 1990 with turnover of one hundred million rupees or more in any of the preceding tax years
(k)	a builder
(l)	a developer
(m), (n)	a payment intermediary and a courier service, for sub-section (2A) only

The rate for tax year 2027 is in the First Schedule, Part III, Division III, paragraph (2)(ii): 15% for independent professional services such as doctors, lawyers, architects, accountants and software engineers working independently.

How does it work in practice?

Who usually deducts. Private hospitals and clinics run as companies, banks, corporate clients, non-profit organizations, foreign consultants, joint ventures and federal ministries or departments are on the list. When they pay your fee they deduct 15% (or the doubled rate if you are not on the Active Taxpayers List) and give you a certificate under section 164.

Who usually does not. A patient paying for a consultation, a family paying a lawyer for a property matter, or a small shopkeeper paying an accountant is an individual. An individual is a prescribed person only if the individual’s turnover was Rs. 100 million or more in any of the preceding tax years. Most private clients are nowhere near that, so they pay the full fee.

The Rs. 30,000 threshold. Even a prescribed person does not deduct where its payments to you for services total less than Rs. 30,000 in the financial year. Once the aggregate reaches that figure, the exception no longer applies.

Fees received through an agent. A proviso to section 153(1) deals with a professional who “receives the payment through an agent or any other third person” who keeps a service charge or fee. In that case the agent is treated as having been paid that charge by the professional, and the professional “shall collect tax along with the payment received”. This can matter where a hospital or platform collects fees for you and keeps a share. The wording is compressed, and how it applies to a given hospital arrangement is not spelt out further in the Ordinance.

Worked example (illustrative figures)

Bilal is an advocate in Karachi, on the Active Taxpayers List. In tax year 2027 he is paid by three clients.

Client	Prescribed person?	Paid in year	Tax deducted
A textile company (private limited)	Yes, clause (b)	Rs. 600,000	Rs. 600,000 x 15% = Rs. 90,000
A shopkeeper, turnover about Rs. 8 million	No	Rs. 200,000	Nil
A registered welfare trust	Yes, clause (d)	Rs. 25,000	Nil, under Rs. 30,000 for the year

Bilal’s gross fees are Rs. 825,000, and Rs. 90,000 has been deducted. All Rs. 825,000 goes in his return. The Rs. 90,000 is a credit under section 168 and, under section 153(3), minimum tax on the Rs. 600,000.

What if a client deducts who should not?

If a payer that is not a prescribed person deducts tax from your fee, that is not a deduction the Ordinance required. Whether and how it can be credited depends on whether the amount was actually paid to the government and reported against your name. The Ordinance does not give a separate procedure for that situation.

Common mistakes

• Assuming every client must deduct. Only persons on the section 153(7) list do. The individual turnover test is Rs. 100 million in any of the preceding tax years. An older figure of fifty million rupees was replaced by the Finance Act, 2020.
• Applying the Rs. 30,000 test per invoice. The threshold is the aggregate paid in a financial year.
• Thinking no deduction means no tax. Fees received without deduction are still income under the Ordinance and are taxed in your return.
• Treating employment pay as a fee. Section 153 covers services “otherwise than as an employee”. Salary is dealt with elsewhere.

What to check in the official text

Read section 153(1) with its proviso on agents, and the full definition of “prescribed person” and “turnover” in section 153(7). Confirm the rate in the First Schedule, Part III, Division III, paragraph (2). Provincial sales tax on professional services is a separate provincial levy and is not covered here.