Banks to start deducting 5% tax on social media income from July 1

Banks and non-banking financial institutions will start deducting 5% withholding tax from revenues received by digital content creators and social media influencers from July 1, 2026, under the Finance Act 2026.

According to the Finance Act 2026, the deduction will apply when any amount is credited to, or received in, a person’s account if the payment represents revenue from social media platforms.

The provision covers income earned from the creation, publication or monetisation of content on digital platforms, including YouTube, Facebook, Instagram, TikTok and other similar platforms.

Payments covered under the law include inward remittances, transfers and credits received through banking channels. The tax will also apply to payments routed through intermediaries, including online payment service providers and digital financial platforms.

The measure has been introduced through Section 154B, which separates earnings of digital content creators and social media influencers from the concessionary tax framework available to general IT and software exporters.

Monetisation income from global social media platforms was previously treated under the IT export framework, which carried lower taxation. While the Finance Bill 2026-27 extended the reduced 0.25% Final Tax Regime for general IT and software exporters until Tax Year 2029, social media creators have been excluded from that benefit.

Read This: FBR pulls YouTubers, TikTokers out of reduced IT export regime; Imposes 5% minimum tax

For resident persons, the 5% deduction will be treated as minimum tax. This means the amount deducted at the banking source will act as the minimum payable tax on social media income.

Resident creators will still be required to calculate their annual tax liability under the normal tax regime while filing returns. They may deduct legitimate business expenses such as production equipment, internet bills, studio rent and editing software costs to arrive at net taxable income.

If the tax calculated under normal income tax slabs is higher than the 5% already deducted by the bank, the creator will have to pay the remaining amount to the Federal Board of Revenue (FBR).

However, if the calculated tax is lower than the 5% deducted at source, the deducted amount will stand as the minimum tax liability. In such cases, the excess amount will not be refundable, adjustable or carried forward.

For non-resident persons without a permanent establishment in Pakistan, the 5% deduction will be treated as final tax.

The FBR may issue rules through a notification in the official Gazette for implementation of the provision, including mechanisms for identification and reporting.