Tax Credits For Salaried And Business Individuals In Pakistan

Day 16: Tax Credits for Salaried and Business Individuals in Pakistan
(Section 62, 63, 64A Explained)

Tax credits in Pakistan can significantly reduce your tax liability—if you know where to look. Whether you’re a salaried individual or running your own business, the Income Tax Ordinance, 2001 offers tax credits under specific sections like 62, 63, and 64A for your investments in shares, insurance, and pension funds.

This guide breaks down these tax credits, eligibility, and how to claim them when filing your return.

Section 62: Tax Credit for Investment in Shares and Sukuks

Section 62 allows tax credits to individuals who invest in new shares or sukuks of public listed companies.

Eligibility Criteria:

The investment must be made from declared income.
The holding period must be at least 24 months.
Only resident individuals can claim this credit.

Limitations:

Credit is allowed on the lower of:
- The actual cost of investment,
- 20% of taxable income, or
- Rs. 2,000,000.

Required Documents:

CDC statement or shareholding certificate
Proof of investment transaction

Section 63: Tax Credit for Investment in Pension Funds

You’re eligible for tax credits if you contribute to an approved pension fund (like VPS) under the Voluntary Pension System rules.

Eligibility Criteria:

Contributions must be made to a SECP-approved fund.
Age should not exceed 60 years (relaxation available till 2025).

Limitations:

Tax credit is the lesser of:
- Contribution amount,
- 20% of taxable income

Required Documents:

Proof of contribution
Fund certificate or acknowledgment receipt

Section 64A: Tax Credit for Health Insurance Premiums

This section offers tax credits to individuals for paying health insurance premiums.

Eligibility Criteria:

Payment should be made to an insurance company registered with SECP.
Applicable only to resident individuals.

Limitations:

Credit is calculated as a proportion of tax payable, based on your total income.

Required Documents:

Premium payment receipts
Insurance policy documents

How to Claim These Credits in FBR IRIS

Log into your FBR IRIS account.
Go to your income tax return form.
Navigate to the “Tax Credits” section.
Input the relevant amount and attach supporting documents where required.

Why Claiming Tax Credits Matters

Many taxpayers miss out on these benefits due to lack of awareness. Claiming eligible credits ensures:

Reduced tax liability
Accurate tax filing
Legal compliance with maximum savings

Final Thoughts

Tax credits are an excellent way to save money and reward financial planning. Make sure to track your investments and insurance payments throughout the year so you’re ready to claim these credits at tax time.

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