TAX CREDIT SYSTEM IN PAKISTAN

(shah Nawaz Bokhari, Rawalpindi)

Section 61-65 part-X of Income-tax ordinance-2001 has elaborated the tax credit system in Pakistan. It is no doubt tax credit system is prevailing in Pakistan. The Tax credit system is prevailing in the following aspects as are under:

I. Charitable Donations
There are different charitable organizations has been working in Pakistan and they are receiving donations from the general public for the welfare of the poor, orphan, or the establishment of i.e Hospitals, Schools, Colleges and universities, etc. The federal or provincial government has the power to exempt or tax credit any institution which is work for chartable. The ratio of the tax credit is 10% to 20% percent of the annual earnings of the particular institution in the annual tax year. If individual or association of person that it will avail thirty percent tax credit on annual income of that year.
II. Tax credit for investment in shares and insurance:
Any company that runs the business of insurance has availed of a twenty percent tax credit on the tax year. Any individual who has been availed premium from the insurance company is an avail tax credit on the particular year.
III. Contribution to an Approved Pension Fund
Those who have earned income in the head of Salary or Income from Business shall entitle to a tax credit for a tax year. If they receive any contribution or premium paid in the year by the person in the approved pension fund under the voluntary pension system rules, 2005, etc. They shall avail of twenty percent tax credit in the annual scheme of pension or any fund who he has received in a specified year.

IV. Tax Credit for employment generation by manufacturers.
The new setup manufacturing company who have established between 2015 to 30th July 2018 and shall avail tax credit in the annual tax year. The Employee Old Age Benefits or Social Security Institution where more than fifty workers have been working can avail tax credit at the ratio of 10% in an annual tax year.

V. Tax Credit for the person employing fresh graduates
Those persons who have qualified graduation from any university from 2017 to onwards shall avail of tax credit in the first earning tax year. The 5% tax credit is available for fresh graduates from any university. Nevertheless, this division shall implement not more than 15% of employees of any company.
VI. Tax credit for Investment (65-B)
Any company that has purchased plant and machinery or replacement shall avail 10% percent tax credit in the tax year. According to new rules for tax credit 2020 to 2022, all companies which have been ruining their business anywhere in Pakistan and purchasing new plants and machinery or replace may get a 10% tax credit on the annual return. Nevertheless, the rate of tax shall amend from time to time or federal government policy. According to the previous analysis, in the year 2010 tax assessed by authority had the power to give a tax credit or otherwise. Conversely, from 2011 to 2016 shall impose a 20% tax credit for all companies which have been running their business. In 2019 tax government had relaxed 5% on the purchase of plants and machinery.
VII. Tax credit for enlistment
Any company which is duly registered with the Stock Exchange Commission of Pakistan in 2022 or before shall avail tax credit of 20% percent in the annual tax year. It will prevail over the upcoming next three years and the last two years shall be payable 10% tax credit for the enlisted company.

VIII. Tax credit for the newly established industrial undertaking:
Where a taxpayer is a company formed for establishing and operating a new industrial undertaking including corporate or dairy farming set up in Pakistan and they can avail tax credit as per annual profit. The tax is assessed by the commissioner as per routine or reports submitted by the Revenue officer.

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