A tax credit is a monetary amount that taxpayers can deduct directly from the amount of taxes they owe to the government. Tax credits, unlike deductions, Directly Decrease the amount of tax payable rather than the amount of taxable income. The amount of a tax credit is determined by the credit’s nature.
Following are few of the Tax credits available under different sections of income Tax ordinance 2001.
Investment in Shares
A person other than a company is permitted to a tax credit for the cost of buying new stock/shares offered to the public by a public corporation listed on any stock exchange in Pakistan in the year in question, if the person other than a company is the initial allottee of the stock or the shares are obtained from the Privatization Commission of Pakistan (Section 62 of the income Tax Ordinance 2001).
Contribution to an Approved Pension fund
Under the Voluntary Pension System Rules, 2005, a qualified person as described in sub-section (19A) of section 2, who derives income chargeable to tax under the head “Salary” or “Income from Business” is obligated to a tax credit for any contribution or premium paid in that year in an authorized pension fund (Section 63 of the income Tax Ordinance 2001).
- Under Section 61 of the income Tax Ordinance 2001,a person is entitled to a tax credit in regard of any amount paid or property given during the year as a donation to –.
- any Pakistani board of education or institution constituted by or under Federal or Provincial legislation;
- any educational institution, hospital, or relief fund founded or operated by the Federal Govt, a Provincial Government, or a local Govt in Pakistan; or
- any charitable organization.
Profit on Debt
A person is entitled to a tax credit on any profit, share in rent, or share in appreciation for the value of a house paid by the person in the year on a loan from a scheduled bank or non-banking finance institution regulated by the Securities and Exchange Commission of Pakistan or advanced by the Government, a local authority, a statutory body, or a public company listed on the stock exchange of Pakistan (Section 64 of the income tax ordinance).