Q. 02. What is the rate of withholding tax on contractors?

Ans: The rate of withholding income tax on contract payments is 2 percent for the contractors who have a business license, and the tax so withheld is advance tax adjustable against gross income tax payable by the contractor on annual income. For contractor who are not registered with ASIA and conduct business without a business license or contrary to approved by-law withholding income tax rate is 7 percent of the contract receipts, and the tax so deducted at source is treated as final tax on this source of income whether the contractor earns profit or incurs loss at the end of the tax year.