Deduction of tax at source:
(1)    Any reason responsible for paying any income chargeable under the head “Salary” shall, at average rate of tax computed at the rates specified in the First Schedule on the estimated income of the assessor under this head for the financial year in which the payment is made after making such adjustment, as may be necessary, for any excess deduction or deficiency arising out of any previous deduction or failure to make such deduction during the said financial year.

Deduction of tax at source (On supply of Cotton Lint etc.)
Notwithstanding anything contained in this Ordinance:
(a)Any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person being resident (hereinafter referred to respectively as “payer” and recipient”), on account of supply of goods or for service rendered to, or the execution of a contract with the Government, or a local authority, or a company, or a registered firm, or any foreign contractor or consultant or consortium shall deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said Financial year, or in the case of an assessor to whom section 72 ort section 81 applies; the assessment year, if any, in which the “said date”, as referred to therein, falls whichever is the later: 

Provided that the provisions of this clause shall apply, mutates mutinies, to any payment made on or after the first day of July, 1998, to a non-resident person on account of execution of a turnkey contract, a contract of sub-contract for designing, supply of a plant and equipment and construction, assembly or like project in Pakistan or any other contract for construction or for service rendered other than that to which the provisions of sub-sections (3A) and (4A) apply. 

Explanation.
For the purpose of clause (a) the expression “supply of goods” includes both cash and credit purchases of goods by the payer, whether under a contract or not, on credit or in cash.

 (b) The Commissioner may, on an application made by any such recipient and after making such enquiry as he thinks fit, allow, by an order in writing, any person responsible for making such payment not to deduct any tax from any payment or payments made to such recpient in any financial year; and where such order is made, the person responsible for making any payment shall thereafter, and until such order is cancelled, make such payment without deduction of tax under clause (a): and

Provided that.
(i) Nothing contained in clause (a) or clause (b) shall apply any payment on account of securitization of receivables or to any payment made on account of the refund of any security deposit to the purchase of an asset under a lease and buy back agreement by a modaraba or leasing company or a banking company or a financial institution.
(ii) Nothing contained in sub-section (10) shall apply to companies as payers and
(iii) Where tax is withheld by any person responsible for making any payment to the Special Purpose Vehicle, on behalf of the originator, it shall be deposited to the credit of the originator.

{Note : The following amendments were made vide Finance Ordinance, 2001.

In the proviso:
(i)                  in clause (i)
(a) after the word “apply” the words “any payment on account of securitization of receivables by a special purpose vehicle to the originator or “ were inserted; and
(b) the word “and”, at the end, was omitted;
(ii)                in clause (ii), for the full stop, at the end, the semi colon and word “; and” were substituted and thereafter a new clause (iii) was added }

Deduction of tax at source (on payment of Brokerage and Commission)
Any person responsible for making any payment in full or in part (including a payment by way of advance) to any person, on account of brokerage or commission on behalf of the Government, a local authority, a company, a registered firm or foreign contractor or consortium shall deduct tax, at the time of making such payment, at the rate specified in the First Schedule:
Provided that where any person receives payment on behalf of his principal and remits it after deducting his commission such commission shall be deemed to have been paid to him and such principal shall collect the tax.
{Note: This sub-section was substituted vide Finance Act, 1999}