he Federal Board of Revenue (FBR) in Pakistan offers several tax rebates, credits, and refunds to eligible taxpayers. These provisions help individuals and businesses reduce their tax liability and claim back excess payments. This guide provides detailed information on all available tax rebates, including applicable percentages, eligibility criteria, and the process to claim them.
1. Tax Rebates Through Tax Credits
Tax credits directly reduce the amount of tax payable. Below are some major tax credits available under the Income Tax Ordinance, 2001 (amended up to 30.06.2024):
a) Tax Credit for Investment in Shares and Sukuks
- Eligibility: Individuals investing in shares of a publicly listed company or Sukuks (Islamic bonds).
- Percentage: 20% of the investment amount or 20% of taxable income, whichever is lower.
- Limit: Maximum tax credit up to Rs. 2,000,000.
b) Tax Credit for Charitable Donations
- Eligibility: Donations made to approved non-profit organizations.
- Percentage: Up to 30% of taxable income for individuals and 20% for companies.
c) Tax Credit for Contribution to Pension Funds
- Eligibility: Contributions to an approved pension fund.
- Percentage: 20% of taxable income.
- Limit: Allowed until the age of 40 years. If older, the limit is reduced by 2% for each year exceeding 40 years.
d) Tax Credit for Industrial Undertakings
- Eligibility: New industrial undertakings established in specified sectors before June 30, 2024.
- Percentage: 10% of tax payable.
e) Tax Credit for Point-of-Sale (POS) Machines
- Eligibility: Retailers integrating POS systems with FBR.
- Percentage: 100% tax credit on machine cost.
2. Tax Refunds (Reclaiming Overpaid Tax)
If you have overpaid tax, you can apply for a refund under Section 170 of the Income Tax Ordinance.
a) Who Can Claim a Refund?
- Salaried individuals whose income tax deducted is more than the actual tax liability.
- Businesses that have paid advance tax exceeding actual tax.
- Individuals who qualify for a tax exemption but were still taxed.
b) Refund Calculation & Process
- Submit a refund application through IRIS (FBR’s online portal).
- The Commissioner must process the refund within 60 days.
- If delayed beyond three months, FBR must pay KIBOR + 0.5% annual compensation.
c) Payment Through Tax Refund Bonds
- Refunds may be issued via Tax Refund Bonds.
- These bonds:
- Have a 3-year maturity.
- Offer 10% annual simple profit.
- Are tradeable in secondary markets.
3. Special Tax Rebates & Reductions
a) Rebate for Senior Citizens (Omitted in 2022)
- Previously, individuals aged 60 years or above received a 50% tax reduction on income below Rs. 1,000,000.
b) Rebate for Teachers & Researchers
- Full-time teachers and researchers in approved institutions.
- Tax reduction: 25% of total tax payable.
c) Tax Credit for Small & Medium Enterprises (SMEs)
- Newly registered SMEs get a 50% reduction in tax liability.
d) Exporters & IT Companies
- IT companies & freelancers registered with FBR.
- 100% tax exemption on IT export earnings up to Rs. 500 million.
4. Advance Tax Adjustments
Advance tax deducted under various sections can be adjusted against total tax liability:
- Section 148: Tax deducted on imported goods.
- Section 153: Withholding tax on services and contracts.
- Section 154: Tax collected on export proceeds.
- Section 156: Withholding tax on prizes and winnings.
If the total tax deducted exceeds the actual liability, you can claim a refund or adjust it against future tax payments.
5. How to Apply for a Tax Rebate or Refund?Step-by-Step Process
- Login to IRIS Portal: Visit iris.fbr.gov.pk and log in.
- Go to “Refund” Section: Select the relevant tax year and type of refund (e.g., salary, business).
- Submit Supporting Documents: Attach bank statements, salary slips, and withholding tax certificates.
- Track Refund Status: Use IRIS tracking to monitor progress.
- Receive Refund: If approved, the refund will be issued via cheque, bank transfer, or refund bonds.
FBR provides multiple opportunities for taxpayers to reduce their tax burden through credits, rebates, and refunds. By understanding the available benefits and following the correct procedures, individuals and businesses can optimize their tax payments and reclaim excess amounts efficiently. If you require professional assistance, consider consulting a tax advisor or visiting the FBR website for more details.
