If you’ve noticed your Jazz balance being lowered by more than you’ve topped it up, the amount being withheld is tax (and not Jazz fee). There are two deductions being made out of your recharge and mobile bill payments in Pakistan: advance income tax under Section 236 of the Income Tax Ordinance and sales tax on telecom services (provincial tax, not the Federal Board of Revenue directly, as telecoms sales tax falls under the province’s jurisdiction in most cases). The two deductions are combined in one document, hence the confusion as to why one tax is being withheld.
Advance Income Tax (Section 236)
This deduction is taken out of every recharge/postpaid connection in Pakistan, whether you’re a filer or not – the only difference is the tax rate. The rates are determined by the Finance Act annually and are changed every year, so rather than giving a specific number that could already be out-of-date, cross-referencing the deduction you’ve seen on your reload receipt or monthly postpaid bill against the current rate on the FBR website is advisable. If you’re an active filer, the advance tax paid on your mobile recharge will be adjusted in your tax return for the year – most people don’t claim it back, however, as they don’t keep track of their reload receipts.
Sales Tax on Telecom Services
This is a consumption tax levied on the telecom operator for the service rendered – it is a final tax and cannot be reclaimed or adjusted.
What Does This Mean for My Return?
If you’re an active filer, the advance tax that’s been withheld from your mobile connection is one of the few withholding taxes you can adjust against your final tax liability for the year – others include the advance tax on your bank transactions and utility bills. It’s a small amount for most people in terms of an individual recharge, but if you’re topping up a business SIM with a postpaid connection, it can cut your tax liability by several thousand rupees depending on your monthly usage. Our recommendation to our clients is to keep a track of their Jazz account statement (available as a bill history in the MyJazz app) so that the amount can be adjusted on their return at the time of filing rather than having to estimate it from memory.
Not sure what’s adjustable on your return or want it double-checked before you file? See our Income Tax Return Filing Services, or contact us through our contact page.
How Do I Actually Claim This Back at the Time of Filing?
The advance tax under 236 for your mobile connection will show up on your annual withholding tax certificate/statement (which you or your consultant will prepare for the purpose of filing your return) and be claimed back as a tax credit against your final tax liability at the time of filing. Most salaried taxpayers don’t think to claim it back as they don’t keep track of their reloads, but over the course of a year on a heavily-used business SIM, it can amount to several thousand rupees being unnecessarily paid to the government.
Prepaid vs Postpaid – Does It Make a Difference?
It doesn’t – the same Section 236 advance tax rules apply to both prepaid recharge and postpaid connections, except that the amount shows up in different places: on a prepaid recharge, it is withheld when you reload, whereas on a postpaid connection, it shows up as a deduction on your monthly bill. The rate, however, is the same in both cases – whichever record you keep of your reloads (receipt or bill) is all you need to keep in terms of documentation related to your connection.
Business SIMs and Company Tax
If the SIM in question is registered and paid for under a company rather than an individual, the same advance tax rules apply in terms of deductibility – except that it will be adjusted against the company’s tax rather than an individual’s. This is a common area of confusion we see with clients who’ve registered a company SIM under their personal NTN by mistake, which leads to complications with the tax adjustment being made.
Frequently Asked Questions
Does the advance tax rate differ for filers vs non-filers on mobile recharge?
Yes – non-filers are charged a higher rate than active filers under Section 236, which is one more disadvantage to not having an ATL status.
Can I get a refund if I never file a tax return?
Unfortunately not – the adjustment can only be claimed through filing a tax return. If you’ve never filed one, the advance tax withheld from your connection over the course of a year is forfeited to the government with no reclaim in the future.
Where can I find my Jazz tax deduction history?
The MyJazz App’s billing/usage history shows a history of reloads and deductions. For postpaid connections, the monthly bill will show the amount of tax withheld.
FAQs
Can I get a certificate from Jazz for my tax filing?
You can use your Jazz billing history as a reference for the tax withheld on your reloads, as Jazz does not issue a separate “tax certificate” like one might get for interest paid on a bank loan. The tax amount will be mentioned in the transaction description on the statement.
Does this apply to mobile internet/data bundles, not just call/SMS recharge?
Yes – advance tax under Section 236 generally applies to all aspects of prepaid/postpaid mobile connectivity, including data bundles.
Is the deduction the same for prepaid and postpaid?
The underlying mechanism for both is the advance tax under Section 236, so the rate is the same for both, although a postpaid business connection will see higher overall deductibility for the year due to higher average usage.
