Tax Deductions In Pakistan

Day 15: Common Tax Deductions You Can Claim in Pakistan

Zakat, Donations, Insurance, Educational Expenses & More

Introduction
Filing taxes isn’t just about paying your dues—it’s also about knowing what you can legally deduct to reduce your tax liability. Pakistan’s tax laws offer various deductions for individuals and businesses, including zakat, charitable donations, insurance premiums, and education expenses. Understanding these deductions can significantly lower your taxable income and help you get the maximum refund or reduce your payable tax.

1. Zakat
Under Section 60 of the Income Tax Ordinance, zakat paid to a registered institution is fully deductible. You must retain evidence of zakat payment and ensure the receiving entity is listed with the Federal Board of Revenue (FBR).

2. Charitable Donations
Donations made to approved non-profit organizations (under Section 61) are deductible up to a specific percentage of your taxable income. To claim this deduction:

The organization must be listed with FBR.
You should obtain a valid receipt.
The deduction is limited to 30% of taxable income for individuals and 20% for companies.

3. Life Insurance Premiums
As per Section 62, life insurance premiums paid to an approved insurance company can be claimed as a deduction. The maximum limit is the lesser of:

15% of taxable income
PKR 2,000,000

4. Investment in Voluntary Pension Schemes
Contributions made to pension funds (under VPS) are deductible up to:

20% of taxable income
Or as specified by FBR annually

5. Educational Expenses
Section 63 allows a tax credit on tuition fees paid for your children’s education (from nursery to higher education). Conditions include:

The child must be enrolled in a recognized institution in Pakistan.
The taxpayer’s taxable income must not exceed the threshold specified in the Finance Act.
A maximum of two children per individual is allowed for this credit.

6. Disability Tax Credit
If you or any dependent is registered as a disabled person, you may be entitled to a tax credit under Section 60D.

7. Foreign Education and Medical Treatment
In specific cases, deductions may also be allowed for expenses related to treatment or education abroad—if routed through proper banking channels and supported by documents.

Best Practices for Claiming Deductions

Keep all receipts and payment evidence.
Ensure institutions are FBR-recognized.
File your return via FBR IRIS and attach supporting documents if required.

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