There are the following tax credits/rebates are allowable:
- Full Time Teacher allowance under 2 schedule Part 3 Clause 2
- Tax Credit on Pensioner’s benefit account and shuhada Family welfare account and on profit of Bahbood Saving Certificates maintained with National Saving Centres
- Foreign Tax Credit also known as unilateral relief
- Tax Credits under the following sections;
- Charitable Donation under section 61
- On Investment in shares, sukuks or life insurance policy under section 62
- On the premium of health insurance under section 62 A
- On Approved Pension Fund under section 63
- Any employment generation by a manufacturing company under section 64B
- Enlistment in any securities exchange in Pakistan under section 65C
- On the equity investment on expansion of machinery or a new project under section 65E
- On investment by a new industrial undertaking under section 6D
- Full Time Teacher Allowance (under 2 Schedule Part 3 clause 2)
A reduction of 40% of a tax payable shall be allowed on a Full-time teacher or a researcher of a recognized non-profit educational or research institution including Government training or research institutions.
The above tax deduction shall be allowed only on tax liability of salary income, if any other income exist, would be excluded for this purpose.
- a) Profits on the Certificates issued by, or any accounts maintained with National Savings Centres is considered or subjected to withholding tax @10% of profit which is full and final tax under the Final Tax Regime (FTR) and the Normal tax rates would not be apply in this case.
- b) Profits on the Bahbood Saving Certificates or pensioner benefit accounts and shuhada welfare certificates maintained with National Savings Centres is not entitled or subjected to withholding tax deduction and the normal tax rates shall not be applied in this case.
- Foreign Tax Credit:
Foreign Tax Credit is also called Unilateral Relief or Cross border transaction relief under section 103.
Foreign source of income by a resident person is exempt from tax in Pakistan under the tax treaty.
If such income is taxable in Pakistan and the taxpayer already paid tax in foreign country then the taxpayer shall be allowed as tax credit by the amount which is lower of;
- Foreign income tax paid
- Pakistan tax payable at an Average rate of tax in respect of foreign tax paid.
The Foreign income tax is to be paid in the foreign country within a period of 2 years. If not, then the Pakistan tax credit shall be considered or treated as tax payable by the person.
- Allowance for investment in Shares, Sukuks and insurance under section 62:
Any Resident person other than a Company shall be entitled to a tax credit in the following conditions;
- Cost of acquiring new shares from the listed company offered to general public provided the resident person is an original allottee or the shares acquired from the privatization commission of Pakistan.
- Cost of acquired sukuks from the listed company offered to general public, provided the resident person is an original allottee.
- Premium paid on a life insurance policy registered under the insurance ordinance, Provided the resident person is deriving salary income or income from business.
Tax credit allowed at the Average rate of tax on the lower of the following:
- Actual cost of shares, sukuks and insurance premium paid
- 20% of Taxable Income
If the acquired shares are disposed off within 24 months, then the relief of tax credit would be added back into the tax payable.
If the acquired policy of life insurance is surrendered within 2 years, then the relief of tax credit allowed shall be deemed to be wrongly allowed and the commissioner shall re-compute the tax payable for the relevant tax year.
- Tax credit for investment in Health Insurance-Section 62A:
Any resident person who is a filer other than a company may get tax credit on any Health Insurance premium paid to any Insurance Company which is registered under the Insurance Law. A person who get tax credit must be filer and is deriving only Salary income or Business income.
Tax Credit shall be allowed or considered at the average rate of tax on the lower of;
- Actual Amount paid to Insurance Company
- 5% of Taxable Income
- Tax Credit on contribution to Approved Pension Fund-Section 63:
Any resident person who is a filer other than a company may get tax credit on Contribution or premium paid to Approved Pension Fund under the voluntary Pension Scheme Rules at Average Rate on the lower of;
- Actual Amount paid or contribute during the year
- 20% of taxable income
- 30% of taxable income of the previous year
Note: In 20% of taxable income limit shall be up to 30/6/2019 in case of person joining at the age 41 or above. Such persons would be allowed an extra contribution of 2% per year for each year of age exceeding 40 years.