2nd Lecture by Mohammad Iqbal Ghori

1. DEDUCTABLE ALLOW
ANCES

2. DEDUCTABLE ALLOWANCES
Zakat.
(1) A person shall be entitled to a deductible
allowance for the amount of any Zakat paid by the
person in a tax year under the Zakat and Ushr
Ordinance, 1980 (XVIII of 1980).
(2) Sub-section (1) does not apply to any Zakat
taken into account under sub-section (2) of
section 40.
(3) Any allowance or part of an allowance under
this section for a tax year that is not able to be
deducted under section 9 for the year shall not be
refunded, carried forward to a subsequent tax
year, or carried back to a preceding tax year.

3. DEDUCTABLE ALLOWANCES
W
orkers’ W
elfare Fund. A person shall be entitled
to a deductible allowance for the amount of any
Workers‘ Welfare Fund paid by the person in tax
year under Workers‘ Welfare Fund Ordinance,
1971 (XXXVI of 1971)]
W
orkers’ Participation Fund.— A person shall be
entitled to a deductible allowance for the amount
of any Workers‘ Participation Fund paid by the
person in a tax year in accordance with the
provisions of the Companies Profit (Workers‘
Participation) Act, 1968 (XII of 1968).]

4. TAX CREDITS

5. TAX CREDITS
Charitable donations
1. A person shall be entitled to a tax credit in
respect of any sum paid, or any property given by
the person in the tax year as a donation to (a) any board of education or any university in
Pakistan established by, or under, a Federal or a
Provincial law;
(b) any educational institution, hospital or relief
fund established or run in Pakistan by Federal
Government or a Provincial Government or a
[Local Government]; or
(c) any non-profit organization.]

6. TAX CREDITS
Charitable donations
2. The amount of a person‘s tax credit allowed under sub-section (1) for a tax
year shall be computed according to the following formula, namely:–
(A/ x C
B)
where –
A is the amount of tax assessed to the person for the tax year before
allowance of any tax credit under this Part;
B is the person‘s taxable income for the tax year; and
C is the lesser of –
(a) the total amount of the person‘s donations referred to in sub-section (1) in
the year, including the fair market value of any property given; or
(b) where the person is –
(i) an individual or association of persons, thirty per cent of the
taxable income of the person for the year; or
(ii) a company, 1[twenty] per cent of the taxable income of the person
for the year.

7. TAX CREDITS
Charitable donations
3.
For the purposes of clause (a) of component C
of the formula in sub-section (2), the fair
market value of any property given shall be
determined at the time it is given.
4.
A cash amount paid by a person as a donation
shall be taken into account under clause (a) of
component C [of] sub-section (2) only if it was
paid by a crossed cheque drawn on a bank.
5.
The [Board] may make rules regulating the
procedure of the grant of approval under subclause (c) of clause (36) of section 2 and any
other matter connected with, or incidental to,
the operation of this section.]

8. TAX CREDITS
Tax credit for investment in shares and insurance
1.
A resident person other than a company shall be entitled to a tax
credit for a tax year.
2.
The amount of a person‘s tax credit allowed under sub-section (1)
for a tax year shall be computed according to the following
formula, namely: —
(A/ x C
B)
where
A is the amount of tax assessed to the person for the tax year before
allowance of any tax credit under this Part;
B is the person‘s taxable income for the tax year; and
C is the lesser of —
(a) the total cost of acquiring the shares, or the total contribution or
premium paid by the person referred to in sub-section (1) in the
year;
(b) fifteen per cent of the person‘s taxable income for the year; or
(c) five hundred thousand rupees.

9. TAX CREDITS
Tax credit for investment in shares and insurance
(3) Where —
(a) a person has been allowed a tax credit under
sub-section (1) in a tax year in respect of the
purchase of a share; and
(b) the person has made a disposal of the share
within thirty six months of the date of
acquisition, the amount of tax payable by the
person for the tax year in which the shares
were disposed of shall be increased by the
amount of the credit allowed.]

10. TAX CREDITS
Contribution to an Approved Pension Fund
(1) An eligible person as defined in sub-section (19A) of section 2
deriving income chargeable to tax under the head ― Salary‖ or
the head ― Income from Business‖ shall be entitled to a tax credit
for a tax year in respect of any contribution or premium paid in the
year by the person in approved pension fund under the Voluntary
Pension System Rules, 2005.
(2) The amount of a person‘s tax credit allowed under sub-section (1)
for a tax year shall be computed according to the following
formula, namely: (A/ x C
B)
Where.A is the amount of tax assessed to the person for the tax year, before
allowance of any tax credit under this Part;
B is the person‘s taxable income for the tax year; and
C is the lesser of —

11. TAX CREDITS
Contribution to an Approved Pension Fund
(i) the total contribution or premium referred to in sub-section (1) paid
by the person in the year; or
(ii) twenty per cent of the [eligible] person‘s taxable income for the
relevant tax year; Provided that [an eligible person] joining the
pension fund at the age of forty-one years or above, during the
first ten years [starting from July 1, 2006] shall be allowed
additional contribution of 2% per annum for each year of age
exceeding forty years. Provided further that the total contribution
allowed to such person shall not exceed 50% of the total taxable
income of the preceding year.
(3) The transfer by the members of approved employment pension or
annuity scheme or approved occupational saving scheme of their
existing balance to their individual pension accounts maintained
with one or more pension fund managers shall not qualify for tax
credit under this section

12. TAX CREDITS
Profit on debt
1.
A person shall be entitled to a tax credit for a
tax year in respect of any profit or share in rent
and share in appreciation for value of house
paid by the person in the year on a loan by a
scheduled bank or non-banking finance
institution regulated by the Securities and
Exchange Commission of Pakistan or
advanced by Government or the 8[Local
Government] 9[or a statutory body or a public
company listed on a registered stock exchange
in in Pakistan] where the person utilizes the
loan for the construction of a new house or the
acquisition of a house.

13. TAX CREDITS
Profit on debt
(2) The amount of a person‘s tax credit allowed under sub-section (1)
for a tax year shall be computed according to the following
formula, namely:—
(A/ x C
B)
where —
A is the amount of tax assessed to the person for the tax year before
allowance of any tax credit under this Part;
B is the person‘s taxable income for the tax year; and
C is the lesser of —
(a) the total profit referred to in sub-section (1) paid by the person in
the year;
(b) 1[fifty] percent of the person‘s [taxable] income for the year; or or
(c) [seven hundred and fifty] thousand rupees.
(3) A person is not entitled to [tax credit] under this section for any
profit deductible under section 17.

14. TAX CREDITS
Miscellaneous provisions relating to tax credits.
1.
2.
3.
4.
Any tax credit allowed under this Part shall be applied in
accordance with sub-section (3) of section 4.
Subject to sub-section (4), any tax credit or part of a tax credit
allowed to a person under this Part for a tax year that is not able
to be credited under sub-section (3) of section 4 for the year shall
not be refunded, carried forward to a subsequent tax year, or
carried back to a preceding tax year.
Where the person to whom sub-section (3) applies is a member of
an association of persons to which sub-section (1) of section 92
applies, the amount of any excess credit under sub-section (3) for
a tax year may be claimed as a tax credit by the association for
that year.
Sub-section (4) applies only where the member and the
association agree in writing for the sub-section to apply and such
agreement in writing must be furnished with the association‘s
return of income for that year

15. TAX CREDITS
Miscellaneous provisions relating to tax credits.
1.
2.
3.
4.
Any tax credit allowed under this Part shall be applied in
accordance with sub-section (3) of section 4.
Subject to sub-section (4), any tax credit or part of a tax credit
allowed to a person under this Part for a tax year that is not able
to be credited under sub-section (3) of section 4 for the year shall
not be refunded, carried forward to a subsequent tax year, or
carried back to a preceding tax year.
Where the person to whom sub-section (3) applies is a member of
an association of persons to which sub-section (1) of section 92
applies, the amount of any excess credit under sub-section (3) for
a tax year may be claimed as a tax credit by the association for
that year.
Sub-section (4) applies only where the member and the
association agree in writing for the sub-section to apply and such
agreement in writing must be furnished with the association‘s
return of income for that year