Tax on Royalty Income in Pakistan (TY 2025-26)
Pakistan royalty income tax TY 2025-26 - Section 6 + 152 treatment, withholding for non-residents, book and music royalties, software licensing, DTAA.
Worked example: Rs 50,000 per month
Annual income Rs 600,000 - here's how it would be taxed both ways under Finance Act 2025.
| Taxable income band | Rate | Income in band | Tax in band |
|---|---|---|---|
| Up to Rs 600,000 | 0% | Rs 600,000 | Rs 0 |
| Total slab tax | Rs 0 | ||
What counts as royalty under the Ordinance
Section 2(54) of the Income Tax Ordinance defines royalty as consideration for the right to use copyright, patent, trademark, design, secret formula, industrial/commercial/scientific equipment, or information concerning such property. Common Pakistani examples: book royalties from publishers, music royalties from PRS / publishers / streaming platforms, software licensing fees, franchise fees, mineral rights royalty, and consideration for licensing an industrial process. Treatment differs sharply for residents vs non-residents.
Resident royalty: slab rates with WHT
When a resident author, musician, or licensor receives royalty from a Pakistani payer, the payer typically deducts Section 153 WHT (or specific royalty WHT depending on the contract structure) at the moment of payment. The royalty income is then taxed under the normal slab rates as part of total income, and the WHT is claimed as advance credit. Royalties paid by foreign payers to Pakistani residents are foreign-source income, also taxable at slab rates, with DTAA credit available for any foreign tax already withheld at source.
Non-resident royalty: Section 152 final tax
When a Pakistani payer remits royalty to a non-resident (foreign software vendor, overseas patent holder, international franchise grantor), Section 152 applies - typically 15% (filer) / 30% (non-filer) WHT, generally as final tax for the non-resident. DTAA can reduce this rate substantially: Pakistan's treaties with the US, UK, Germany, Singapore, and most major partners cap royalty WHT at 10–15% with the appropriate treaty form filed.
Filing path for Pakistani authors and licensors
If you are a Pakistani resident receiving royalty, declare it on your IRIS return under business or other-source income (the precise code depends on the structure - Section 18 for business-form royalty, Section 39 for occasional income). Claim the Section 153 WHT already deducted by the payer as advance tax. For foreign-source royalties, declare in foreign-income section and attach DTAA documentation if foreign tax was paid abroad. Maintain royalty statements from publishers/platforms as primary evidence.
Frequently asked questions
Is royalty income taxable in Pakistan?
Yes. Resident royalty is taxed at slab rates under the normal income heads. Non-resident royalty is taxed under Section 152 at 15%/30% (DTAA can reduce this).
Are book royalties tax-free for Pakistani authors?
No. Book royalties from Pakistani publishers are taxable as business/other-source income at slab rates. Payers typically deduct Section 153 WHT which the author claims as advance tax.
How are music streaming royalties taxed?
Royalties from Spotify, Apple Music, and similar foreign platforms are foreign-source income - taxable at slab rates with DTAA credit for any foreign tax already withheld at source.
What's the WHT on royalty paid to a foreign software vendor?
Section 152 - typically 15% filer / 30% non-filer, generally as final tax. DTAA can reduce this; the foreign vendor must file a treaty-residency certificate to claim the lower rate.
Can I claim foreign tax credit on overseas royalty income?
Yes under the relevant DTAA. Pakistan allows credit for foreign tax already withheld at source, up to the Pakistani tax that would have been due on the same income.