The Federal Board of Revenue (FBR) in Pakistan offers a range of tax exemptions to various individuals and entities based on different criteria. Here are some of the most common tax exemptions offered by FBR in Pakistan:
- Agriculture income tax exemption: Individuals who earn income through agriculture are exempted from paying income tax if their income does not exceed PKR 400,000 per annum.
- Charitable donations tax exemption: Taxpayers can claim tax exemptions on donations made to registered charities and non-profit organizations in Pakistan. The exemption is equal to the amount donated or 30% of the taxpayer’s taxable income, whichever is less.
- Zakat deduction: Zakat is a religious obligation for Muslims and is collected by the government in Pakistan. Taxpayers who pay Zakat can claim a deduction of the amount paid from their taxable income.
- Education expenses tax exemption: Taxpayers can claim a tax exemption on the education expenses of their children studying in Pakistan. The exemption is limited to PKR 500,000 per annum per child.
- Senior citizen tax exemption: Individuals over the age of 60 years who earn an income of less than PKR 1.2 million per annum are exempted from paying income tax.
- Tax exemption for disabled persons: Disabled persons who earn an income of less than PKR 1.2 million per annum are exempted from paying income tax.
- Tax exemption for startups: Starting on March 22, 2021, startups are no longer exempt from income tax on their income. However, they are now eligible for a full tax credit equivalent to 100% of their income tax obligations.
- To claim these tax exemptions, taxpayers are required to provide relevant documentation and evidence to support their eligibility. For instance, taxpayers claiming the education expenses tax exemption must provide receipts of their children’s education expenses. Similarly, disabled persons must provide a disability certificate issued by the relevant government authority to claim the tax exemption.
It is important to note that tax exemptions are subject to change and taxpayers should consult the latest tax laws and regulations before claiming any exemptions.