Vehicle Token Tax vs Section 231B in Pakistan: What's the Difference?
Vehicle owners in Pakistan often confuse Vehicle Token Tax with Section 231B advance income tax. Although both can be associated with owning, registering, transferring, or paying taxes on a vehicle, they are not the same tax.
Vehicle Token Tax is generally a motor vehicle tax collected under the applicable provincial or territorial motor vehicle laws. Section 231B, on the other hand, is a provision of Pakistan's federal Income Tax Ordinance, 2001 dealing with advance income tax on certain motor vehicle transactions.
Understanding the difference is important because a vehicle owner may have to deal with both charges depending on the transaction and the applicable rules.
What Is Vehicle Token Tax?
Vehicle Token Tax is a tax associated with the use and registration of a motor vehicle. It is generally administered under the motor vehicle taxation rules applicable in the relevant province or territory.
The amount can depend on factors such as:
- Province or territory
- Vehicle category
- Engine capacity
- Type of vehicle
- Registration status
- Applicable local motor vehicle tax rules
Because motor vehicle taxation is not governed by one single nationwide token-tax schedule, the amount payable can differ between Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, and Islamabad Capital Territory.
What Is Section 231B?
Section 231B of the Income Tax Ordinance, 2001 deals with advance income tax relating to motor vehicles.
Unlike ordinary vehicle token tax, Section 231B is part of the federal income tax system. It can apply at specified motor vehicle transactions, including certain purchases, registrations, transfers, and other transactions covered by the section.
FBR identifies authorized dealers of motor cars as withholding agents for Section 231B, which demonstrates that the provision operates within the federal withholding-tax framework.
Vehicle Token Tax vs Section 231B
| Feature | Vehicle Token Tax | Section 231B |
|---|---|---|
| Type of tax | Motor vehicle tax | Advance income tax |
| Tax system | Provincial or territorial motor vehicle taxation | Federal income tax |
| Main purpose | Tax associated with the use/registration of a vehicle | Collection of advance income tax on specified motor vehicle transactions |
| Legal framework | Applicable provincial/territorial motor vehicle laws | Income Tax Ordinance, 2001 |
| Rate basis | Depends on applicable local rules | Depends on the vehicle and transaction covered by Section 231B |
| Filer/non-filer impact | Depends on the relevant local rules | Can affect the applicable federal advance-tax rate |
Is Token Tax the Same as 231B?
No. Vehicle Token Tax and Section 231B are separate taxes with different legal bases.
Token Tax is related to motor vehicle taxation, while Section 231B is an advance income tax provision under federal income tax law.
Therefore, paying your annual vehicle token tax does not automatically mean that you have paid every amount that may be applicable under Section 231B.
Why Do People Confuse Token Tax and Section 231B?
The confusion usually occurs because both taxes can appear in connection with a vehicle registration or payment process.
For example, when a person purchases or registers a car, several different government charges may be involved. These can include registration-related charges, motor vehicle tax, advance income tax, and other applicable duties or fees.
Because these amounts may be collected around the same transaction, vehicle owners sometimes refer to all of them simply as "token tax."
From a tax perspective, however, they should be treated separately.
When Is Section 231B Collected?
Section 231B can apply to specified motor vehicle transactions. Depending on the applicable subsection and circumstances, advance income tax may be collected by a motor vehicle dealer, manufacturer, registration authority, or another prescribed person.
FBR's withholding framework identifies authorized motor-car dealers as withholding agents for Section 231B.
The exact tax amount therefore depends on the transaction being performed and the vehicle details relevant under the current law.
Section 231B at the Time of Buying a Car
When a new motor vehicle is purchased, Section 231B can require the relevant advance income tax to be collected from the buyer where the statutory conditions are met.
The amount can depend on factors such as:
- Vehicle type
- Engine capacity
- Value of the vehicle
- Whether the vehicle is locally manufactured or imported
- Taxpayer's ATL status
- The particular transaction taking place
Therefore, a person should not assume that the same 231B amount applies to every car.
Section 231B and Filer vs Non-Filer
One important difference between token tax and Section 231B is that federal advance income tax rules can provide different treatment depending on whether the taxpayer appears on the Active Taxpayers' List.
FBR's motor vehicle withholding rules have historically provided separate filer and non-filer rates for specified vehicle transactions. The applicable rate should always be checked against the current FBR withholding-tax rate card because rates can change through Finance Acts.
FBR's current rate-card page identifies the Tax Year 2027 withholding tax rate card as updated through June 30, 2026 under Finance Act 2026.
Does Token Tax Depend on Being a Filer?
Not necessarily in the same way as federal Section 231B.
Token Tax is governed by the applicable motor vehicle taxation rules of the province or territory. Some local motor vehicle tax structures may have their own filer-related provisions, while others may use different criteria.
Therefore, you should not automatically apply the federal filer/non-filer treatment under Section 231B to the calculation of provincial Token Tax.
Token Tax in Islamabad vs Section 231B
Islamabad Capital Territory provides a useful example of why these taxes should be kept separate.
The Finance Act 2026 amended the motor vehicle taxation schedule applicable in Islamabad Capital Territory. The revised schedule includes Token Tax on motor vehicles and specifies different tax treatment according to vehicle category and engine capacity. For example, the 2026 schedule lists Rs. 20,000 for vehicles up to 1000cc and percentage-based rates of invoice value for certain higher engine-capacity categories.
These Token Tax provisions are separate from the federal income-tax provisions contained in Section 231B.
Can You Pay Both Token Tax and Section 231B?
Yes. Depending on the vehicle and transaction, a person can have both obligations.
For example, a vehicle owner may have an annual motor vehicle tax obligation under the relevant local law while also encountering Section 231B advance income tax when purchasing, registering, or transferring a vehicle under the conditions specified by the Income Tax Ordinance.
Paying one does not automatically cancel the other.
Is Section 231B a Permanent Vehicle Tax?
No.
Section 231B is an advance income tax provision. It is not simply an annual vehicle ownership tax.
This is one of the biggest differences between Section 231B and Token Tax. Token Tax is generally connected with the motor vehicle taxation system, whereas Section 231B operates through the federal income tax framework.
Is Section 231B Adjustable?
Section 231B is an advance income tax provision. Depending on the applicable transaction and statutory treatment, tax collected under the income tax law may be treated as advance tax and dealt with against the taxpayer's income tax liability according to the relevant provisions.
Therefore, it should not automatically be treated as an additional permanent cost without checking the applicable income tax rules.
Example: Token Tax vs 231B
Suppose a person purchases a car.
During the vehicle transaction, the person may encounter several different charges.
| Charge | What It Represents |
|---|---|
| Vehicle Token Tax | Motor vehicle tax under the applicable provincial/territorial rules |
| Section 231B | Federal advance income tax on specified motor vehicle transactions |
| Registration Fee | Fee associated with registering the vehicle |
| Other applicable charges | Duties, fees, or taxes depending on the vehicle and transaction |
These amounts should not be combined and described as a single "token tax."
Does Section 231B Apply to Motorcycles?
The treatment of motorcycles and other vehicles under Section 231B has changed over time and depends on the wording of the applicable law.
FBR has previously clarified that Section 231B withholding was applicable to cars and that no such tax was imposed on motorcycles and auto-rickshaws under the rules discussed in its clarification.
Because vehicle-tax legislation can change, the current applicable provision should be checked before assuming that a motorcycle or other vehicle falls within Section 231B.
Does Section 231B Apply to Commercial Vehicles?
The scope of Section 231B has changed through legislative amendments.
FBR's explanatory material shows that the provision was expanded beyond the earlier private-vehicle wording and also identifies exclusions for certain categories, including public transportation, carriage of goods, agricultural machinery, rickshaws, motorcycle rickshaws, and certain low-engine-capacity vehicles under the relevant amendments.
For this reason, the type and use of the vehicle should be checked instead of assuming that every vehicle is treated identically.
Which Tax Is Paid Every Year?
Vehicle Token Tax is generally the charge people associate with recurring motor vehicle tax payments, although the exact payment frequency and mechanism depend on the applicable provincial or territorial law.
Section 231B, in contrast, is tied to specified income-tax transactions and is not simply an annual "car ownership tax."
Which Tax Is Federal?
Section 231B is federal. It forms part of the Income Tax Ordinance, 2001 administered through the federal income tax system.
Token Tax is generally provincial or territorial. Its rules depend on the jurisdiction in which the vehicle is registered and the relevant motor vehicle taxation legislation.
Why Checking the Province Matters
There is no single nationwide Token Tax table that can safely be applied to every vehicle in Pakistan.
The amount can differ depending on whether the vehicle is registered in Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, or Islamabad Capital Territory.
For example, Finance Act 2026 specifically amended the motor vehicle taxation schedule applicable in Islamabad Capital Territory.
Therefore, a vehicle owner should identify the registration jurisdiction before calculating Token Tax.
Common Mistakes About Token Tax and Section 231B
- Assuming Token Tax and 231B are the same tax
- Calling every vehicle-related government charge "token tax"
- Using Punjab Token Tax rates for a vehicle registered in another jurisdiction
- Applying an old Section 231B rate without checking the current tax year
- Ignoring Active Taxpayer List status when calculating applicable federal advance tax
- Assuming 231B is an annual vehicle ownership tax
- Assuming payment of Token Tax automatically settles Section 231B
- Ignoring vehicle type, engine capacity, transaction type, or applicable exemptions
Frequently Asked Questions
Is Token Tax the same as Section 231B?
No. Token Tax is generally a motor vehicle tax under the applicable provincial or territorial law, while Section 231B is a federal advance income tax provision for specified motor vehicle transactions.
Is Section 231B an income tax?
Yes. Section 231B forms part of the federal Income Tax Ordinance, 2001 and deals with advance income tax related to specified motor vehicle transactions.
Is Token Tax a federal tax?
Generally, Token Tax is administered under the applicable provincial or territorial motor vehicle taxation system rather than being the same federal income tax imposed under Section 231B.
Do I have to pay Token Tax and 231B both?
Depending on the vehicle and transaction, both can apply because they arise under different legal frameworks.
Does 231B apply when buying a car?
Section 231B can apply to specified motor vehicle purchase and registration transactions. The exact tax depends on the vehicle, transaction, taxpayer status, and current law.
Does filer status affect Section 231B?
Yes. The applicable federal advance-tax treatment can differ according to Active Taxpayers' List status for transactions covered by the relevant provisions.
Does filer status affect Token Tax?
It depends on the applicable provincial or territorial motor vehicle tax rules. Federal Section 231B filer rules should not automatically be applied to Token Tax.
Is Section 231B paid every year?
No. Section 231B is not simply an annual vehicle ownership tax. It applies to specified transactions and circumstances under the Income Tax Ordinance.
Can Token Tax rates change?
Yes. Motor vehicle tax rates can be changed by the relevant provincial or territorial government. For example, the Finance Act 2026 amended the motor vehicle taxation schedule applicable in Islamabad Capital Territory.
Where can I check the current Section 231B rates?
The Federal Board of Revenue publishes withholding tax rate cards. The current rate-card page lists the Tax Year 2027 card as updated through June 30, 2026 under Finance Act 2026.
Final Thoughts
Vehicle Token Tax and Section 231B are two different taxes that are often confused by vehicle owners in Pakistan.
Token Tax belongs to the motor vehicle taxation system applicable in the relevant province or territory, while Section 231B is a federal advance income tax provision under the Income Tax Ordinance, 2001.
The simplest way to remember the difference is:
Token Tax = Motor Vehicle Tax
Section 231B = Federal Advance Income Tax on specified motor vehicle transactions
Before calculating either amount, always check the vehicle's registration jurisdiction, engine capacity, transaction type, taxpayer's ATL status, and the current tax year. This is especially important because vehicle-tax and withholding-tax rules can change through new legislation and Finance Acts.