The Federal Board of Revenue (FBR) has recorded a sharp decline in withholding income tax collection through electricity bills from Karachi during the first 10 months of fiscal year 2025-26, reflecting changing energy consumption patterns and increasing reliance on solar power systems.
According to official sources, withholding tax collection under electricity bills dropped by nearly 30% during July-April FY2025-26. The tax authority collected Rs20.5 billion during the period, compared with Rs29.40 billion in the corresponding months of the previous fiscal year.
The FBR collects withholding income tax from industrial, commercial, and domestic electricity consumers through monthly utility bills under Section 235 of the Income Tax Ordinance, 2001. The tax is recovered through electricity distribution companies, including K-Electric in Karachi.
Officials said the major reason behind the decline was lower electricity consumption across different consumer categories. Tax authorities believe the growing installation of solar energy systems has significantly reduced dependence on grid electricity, resulting in lower withholding tax collection through electricity bills.
Sources within the local tax office said the FBR has started a detailed review to determine the exact factors contributing to the decline in tax receipts.
The slowdown became more visible on a monthly basis, as withholding tax collection in April 2026 alone reportedly fell by 41% compared with April last year.
Analysts noted that Pakistan’s increasing transition toward renewable energy and energy-efficient technologies is gradually affecting traditional electricity-based tax collection mechanisms. They added that declining industrial activity, rising electricity tariffs, and reduced business operations may also have contributed to lower electricity usage and weaker tax collection.
Experts believe the trend could create long-term challenges for revenue authorities that rely heavily on utility-based withholding tax systems for documentation and tax collection.
