Section 231B Explained: Motor Vehicle Advance Tax in Pakistan 2026-27
Section 231B of the Income Tax Ordinance, 2001 deals with advance tax on certain motor vehicle transactions in Pakistan. This tax is generally collected when a vehicle is purchased, registered, transferred, or sold in situations covered by the relevant provisions of the law.
For vehicle owners and buyers, Section 231B is particularly important because the amount of tax can depend on the vehicle's engine capacity, value, and whether the taxpayer is appearing on the Active Taxpayers List (ATL).
This guide explains Section 231B in simple terms, including who pays the tax, when it is collected, how filer and non-filer rates differ, and how the tax is calculated.
What Is Section 231B?
Section 231B is a provision of Pakistan's Income Tax Ordinance, 2001 relating to advance tax on motor vehicles.
The tax is collected at specified stages of a motor vehicle transaction rather than being calculated as part of an individual's annual salary tax. Depending on the transaction, the relevant authority, manufacturer, or other collecting person may collect the tax.
It is important to understand that Section 231B is different from the annual motor vehicle tax collected under other provisions. Section 231B primarily concerns advance income tax connected with specified motor vehicle transactions.
When Does Section 231B Apply?
Section 231B can become relevant in several motor vehicle transactions, including:
- Purchase or registration of certain motor vehicles
- Transfer of registration or ownership
- Specified sales of motor vehicles
- Certain transactions involving locally manufactured or assembled vehicles
- Certain vehicle transactions where special provisions apply
The exact treatment depends on the type of transaction and the applicable subsection of Section 231B.
Who Collects Section 231B Tax?
The person or authority responsible for collecting the tax depends on the transaction.
For vehicle registration, the relevant motor vehicle registration authority is involved in collecting the applicable advance tax. In specified cases involving the sale of vehicles, the manufacturer or other person identified by the law may have collection responsibilities.
The tax is therefore normally collected during the relevant transaction instead of requiring the vehicle owner to calculate and separately deposit the amount in the same way as an ordinary annual income tax payment.
Section 231B and Filer vs Non-Filer
One of the most important features of Section 231B is the difference between taxpayers appearing on the Active Taxpayers List (ATL) and those who are not.
For the percentage-based vehicle purchase or registration rates, the current FBR rate structure provides substantially higher rates for persons who are not appearing on the ATL. The published rate card shows non-ATL rates at three times the corresponding ATL rates across the engine-capacity bands.
| Engine Capacity | ATL Rate | Non-ATL Rate |
|---|---|---|
| Up to 850cc | 0.50% of value | 1.50% of value |
| 851cc to 1,000cc | 1.00% of value | 3.00% of value |
| 1,001cc to 1,300cc | 1.50% of value | 4.50% of value |
| 1,301cc to 1,600cc | 2.00% of value | 6.00% of value |
| 1,601cc to 1,800cc | 3.00% of value | 9.00% of value |
| 1,801cc to 2,000cc | 5.00% of value | 15.00% of value |
| 2,001cc to 2,500cc | 7.00% of value | 21.00% of value |
| 2,501cc to 3,000cc | 9.00% of value | 27.00% of value |
| Above 3,000cc | 12.00% of value | 36.00% of value |
These percentage rates are the published rates for the relevant Section 231B(1) and 231B(3) transactions. Always check the latest FBR rate card before completing a vehicle transaction because tax rates and applicable provisions can change through subsequent Finance Acts.
How Is Section 231B Tax Calculated?
For the percentage-based rates, the basic calculation is:
Section 231B Tax = Applicable Vehicle Value × Applicable Tax Rate
The applicable vehicle value is not necessarily the same as the amount you personally paid in every situation. The law provides different valuation rules depending on whether the vehicle is imported, locally manufactured or assembled, or auctioned.
Example 1: ATL Person Buying a 1,500cc Vehicle
Suppose the applicable value of a vehicle is Rs. 5,000,000 and its engine capacity is 1,500cc.
The applicable ATL rate in the published Section 231B rate structure is 2%.
Tax = Rs. 5,000,000 × 2% = Rs. 100,000
Therefore, the advance tax under this example would be Rs. 100,000.
Example 2: Non-ATL Person Buying the Same Vehicle
For the same Rs. 5,000,000 vehicle with a 1,500cc engine, the corresponding non-ATL rate is 6%.
Tax = Rs. 5,000,000 × 6% = Rs. 300,000
The difference in this example is Rs. 200,000.
This illustrates why ATL status can have a significant effect on the upfront tax cost of a vehicle transaction.
What Does "Value of Vehicle" Mean?
The value used for Section 231B is determined according to the applicable legal rules.
For an imported vehicle, the relevant value can include the import value assessed by Customs together with applicable customs duty, federal excise duty, and sales tax at the import stage.
For a vehicle manufactured or assembled locally, the relevant value can be based on the invoice value inclusive of applicable duties and taxes.
For an auctioned vehicle, the applicable value can be based on the auction value together with the relevant duties and taxes.
This means that simply multiplying the advertised showroom price by the tax rate may not always produce the legally applicable amount.
Section 231B for Transfer of Vehicle Ownership
Section 231B also contains provisions relating to transfer of registration or ownership of motor vehicles.
The applicable tax for a transfer is structured differently from the percentage-based tax that applies to certain purchase or registration transactions.
Under the published rate structure, transfer tax is generally based on engine capacity and taxpayer status. The law also provides for a reduction in the applicable transfer tax over time from the date of first registration in Pakistan in relevant cases.
| Engine Capacity | ATL Rate | Non-ATL Rate |
|---|---|---|
| Up to 850cc | Nil | Nil |
| 851cc to 1,000cc | Rs. 5,000 | Rs. 15,000 |
| 1,001cc to 1,300cc | Rs. 7,500 | Rs. 22,500 |
| 1,301cc to 1,600cc | Rs. 12,500 | Rs. 37,500 |
| 1,601cc to 1,800cc | Rs. 18,750 | Rs. 56,250 |
| 1,801cc to 2,000cc | Rs. 25,000 | Rs. 75,000 |
| 2,001cc to 2,500cc | Rs. 37,500 | Rs. 112,500 |
| 2,501cc to 3,000cc | Rs. 50,000 | Rs. 150,000 |
| Above 3,000cc | Rs. 62,500 | Rs. 187,500 |
These amounts should be treated as a guide to the published rate structure rather than a substitute for checking the current law, because applicable reductions and other provisions can affect the final amount.
Special Rules for Certain Vehicle Transactions
Section 231B contains additional provisions for particular types of vehicle transactions. For example, separate fixed amounts can apply in certain ownership-transfer situations, while another provision can apply to specified sales of locally manufactured motor vehicles.
The published FBR rate card also contains special treatment where engine capacity is not applicable and the vehicle value reaches the specified threshold. Electric vehicles can therefore require particular attention because engine capacity may not be available in the conventional form used for petrol or diesel vehicles.
For this reason, taxpayers should not assume that every vehicle transaction can be calculated using only the standard engine-capacity table.
Is Section 231B the Same as Annual Vehicle Tax?
No. Section 231B and annual motor vehicle tax are separate tax provisions.
Section 231B generally concerns advance income tax collected in connection with specified vehicle transactions.
Annual motor vehicle tax is a separate charge that may be collected according to the applicable vehicle-tax rules and provincial arrangements.
Therefore, paying Section 231B tax does not automatically mean that all other vehicle-related taxes, registration charges, token tax, or fees have been paid.
Is Section 231B Refundable or Adjustable?
Section 231B tax is generally treated as advance tax under the income tax system. Whether and how it is adjustable depends on the applicable provision, taxpayer circumstances, and the treatment prescribed under the Income Tax Ordinance.
Taxpayers should retain the relevant tax payment and vehicle documentation so that the transaction can be properly reflected in their tax records where required.
Why ATL Status Matters for Vehicle Buyers
ATL status can make a substantial difference to the amount collected under Section 231B.
A person appearing on the Active Taxpayers List can qualify for the lower ATL rate in transactions where the law provides different ATL and non-ATL rates.
A person who is not appearing on the ATL can face a significantly higher rate. For the percentage-based Section 231B vehicle rates shown above, the published non-ATL rate is three times the corresponding ATL rate.
This is one reason taxpayers should verify their ATL status before completing a major vehicle transaction.
Section 231B vs Section 234
Section 231B should not be confused with Section 234.
Section 231B deals with advance tax associated with specified motor vehicle transactions.
Section 234 deals with tax on motor vehicles and has its own rates and collection mechanism.
Both provisions can appear in discussions about vehicle taxation, but they serve different purposes. A vehicle owner should therefore check which section applies to the particular charge being requested.
Common Mistakes About Section 231B
- Assuming every vehicle has the same tax rate: Rates can vary by engine capacity and transaction type.
- Ignoring ATL status: Non-ATL rates can be substantially higher.
- Using showroom price without checking the legal value: The tax base can be determined under specific valuation rules.
- Confusing Section 231B with annual vehicle tax: They are separate provisions.
- Assuming all electric vehicles follow the normal engine-capacity table: EVs may require special treatment because engine capacity may not apply.
- Using an old tax table: Vehicle tax rules and rates can change through Finance Acts and updated FBR rate cards.
Frequently Asked Questions
What is Section 231B in Pakistan?
Section 231B of the Income Tax Ordinance, 2001 deals with advance tax on specified motor vehicle transactions, including certain purchase, registration, transfer, and sale transactions.
Who pays Section 231B tax?
The tax generally applies to the person involved in the relevant motor vehicle transaction, with collection carried out by the authority, manufacturer, or other person specified by law.
Does Section 231B apply to non-filers?
Yes. Non-ATL persons can be subject to higher Section 231B rates in transactions where the law provides separate ATL and non-ATL rates.
How much tax does a filer pay on a car?
It depends on the transaction, vehicle value, and engine capacity. For the percentage-based purchase or registration rates, the current published ATL rates range from 0.50% for vehicles up to 850cc to 12% for vehicles above 3,000cc.
How much does a non-filer pay under Section 231B?
The published non-ATL rates for the percentage-based Section 231B vehicle transactions range from 1.50% for vehicles up to 850cc to 36% for vehicles above 3,000cc.
Is Section 231B the same as token tax?
No. Section 231B is an income-tax provision concerning advance tax on specified motor vehicle transactions. Token or annual vehicle tax is a separate charge.
Does Section 231B apply to electric vehicles?
Special provisions can apply where a vehicle does not have a conventional engine-capacity classification. The applicable value-based rule should therefore be checked for the particular electric vehicle and transaction.
Can Section 231B rates change?
Yes. Pakistan's tax rates and rules can be amended through Finance Acts and subsequent legislation. Always check the latest FBR withholding tax rate card and applicable law before relying on a rate for an actual transaction.
Final Thoughts
Section 231B is an important part of Pakistan's motor vehicle tax framework because it can create a significant upfront tax cost when a vehicle is purchased, registered, transferred, or sold in a transaction covered by the section.
The most important factors to check are the type of transaction, engine capacity, applicable vehicle value, and the taxpayer's ATL status. Non-ATL rates can be considerably higher than ATL rates, making tax status particularly important when purchasing or registering a vehicle.
Because tax legislation and withholding rates can change, vehicle buyers should verify the latest FBR rate card and applicable law before making a payment.
Sources and Disclaimer
Primary source: Federal Board of Revenue (FBR), Income Tax Ordinance, 2001, and FBR Withholding Income Tax Rate Card.
Reviewed for: Tax Year 2027 / Financial Year 2026-27.
Disclaimer: This article is provided for general informational and educational purposes. Tax rates, exemptions, valuation rules, and other legal requirements may change. The applicable law and the latest official FBR notifications and rate cards should be consulted for an actual transaction. This article does not constitute professional tax or legal advice.