Want to lower your FBR taxes while donating others? A Detailed Guide

In Pakistan, giving back to society through charitable donations doesn’t just benefit the community—it can also lighten your tax burden. Thanks to Section 61 of the Income Tax Ordinance, 2001, individuals and entities can claim a tax credit for charitable donations made to approved organizations.

This provision, overseen by the Federal Board of Revenue (FBR), encourages philanthropy while offering financial relief to taxpayers. If you’re wondering how this works, who qualifies, and how to maximize your tax savings, you’re in the right place. Let’s explore the details of this tax benefit as per the latest updates in 2025.

What is the Tax Credit for Charitable Donations u/s 61?

Section 61 of the Income Tax Ordinance, 2001, allows taxpayers to claim a tax credit for money or property donated to specific charitable institutions during a tax year.

Unlike a deduction that reduces your taxable income, a tax credit directly lowers the amount of tax you owe, making it a powerful incentive for charitable giving.

This benefit reflects Pakistan’s commitment to supporting welfare initiatives while rewarding taxpayers who contribute to the greater good.

The FBR updated the ordinance through the Finance Act, 2021, with subsequent clarifications and procedural enhancements continuing into 2025. These updates ensure transparency and streamline the process for claiming this credit.

Who Qualifies for the Tax Credit?

To enjoy the tax credit for charitable donations u/s 61, your donation must meet specific criteria:

1. Eligible Recipients: The donation must go to:
   • A board of education or university in Pakistan established under federal or provincial law.
   • An educational institution, hospital, or relief fund run by the federal or provincial government or a local authority.
   • A nonprofit organization approved by the Securities and Exchange Commission of Pakistan (SECP) or listed under Clause 61, Part I of the Second Schedule of the ordinance.
2. Payment Method: For cash donations, payment must be made via a crossed cheque drawn on a bank. This ensures traceability and prevents misuse. Property donations, on the other hand, are valued at their fair market value at the time of transfer.
3. Donor Eligibility: Both individuals and entities (like companies or associations of persons) can claim this credit, provided they file their tax returns with the FBR.

How is the Tax Credit Calculated?

The amount of tax credit you can claim under Section 61 is calculated using a simple formula outlined in the ordinance:

(A / B) × C

Where:

• A = The tax assessed before any credits for the tax year.
• B = Your taxable income for the tax year.
• C = The lesser of:
  • The total amount donated (cash or fair market value of property).
  • 30% of your taxable income (for individuals or associations of persons) or 20% (for companies).

Example Calculation

Let’s say you’re an individual with a taxable income of PKR 1,000,000 in 2025. You donate PKR 250,000 to an approved nonprofit via a crossed cheque. Your assessed tax before credits is PKR 150,000. Here’s how it works:

• C = Lesser of PKR 250,000 or 30% of PKR 1,000,000 (PKR 300,000) = PKR 250,000.
• Tax credit = (150,000 / 1,000,000) × 250,000 = PKR 37,500.

So, your tax liability drops from PKR 150,000 to PKR 112,500—a significant saving! if you want to get the exact tax calculation, try our FBR INCOME TAX CALCULATOR 2025

Key Limits and Conditions

While the tax credit for charitable donations u/s 61 is generous, it comes with caps and rules to ensure fairness:

• Donation Cap: The credit is limited to 30% of taxable income for individuals and associations of persons, and 20% for companies. Any excess donation won’t qualify for the credit in that tax year.
• Banking Channel: Cash donations must be verifiable through banking records. This rule doesn’t apply to property donations, but the fair market value must be properly documented.
• Associate Donations: If you donate to an associate (e.g., a family member’s nonprofit), the credit is capped at 15% of your taxable income to prevent abuse.

List of Government-Approved Donation Centers for Tax Credit u/s 61

To claim the tax credit for charitable donations u/s 61, your contribution must go to an FBR-approved entity. Below is a list of notable government-approved donation centers in Pakistan, drawn from the Income Tax Ordinance, 2001 (including the Thirteenth Schedule), and verified sources as of March 06, 2025. This list spans education, healthcare, welfare, and more:

Education and Research

1. The Citizens Foundation (TCF) – A leading nonprofit providing education to underprivileged children across Pakistan.
2. Aga Khan University – A premier institution established under federal law, focused on education and healthcare.
3. Lahore University of Management Sciences (LUMS) – A top-tier university recognized under provincial law.
4. Fund for Promotion of Science and Technology in Pakistan – Supports scientific research and education.
5. University of the Punjab – One of Pakistan’s oldest public universities, eligible under federal/provincial law.
6. National University of Sciences and Technology (NUST) – A federally recognized institution for higher education.

Healthcare

7. Shaukat Khanum Memorial Trust – Runs cancer hospitals and qualifies for tax credits.
8. Indus Hospital – A nonprofit offering free healthcare services, SECP-approved.
9. Al-Shifa Trust Eye Hospital – Provides eye care and is listed under approved entities.
10. National Institute of Cardiovascular Diseases (NICVD) – A government-run facility for heart care.
11. Layton Rahmatulla Benevolent Trust (LRBT) – Offers free eye treatment nationwide.
12. Pakistan Red Crescent Society – A humanitarian organization with healthcare initiatives.

Relief and Welfare

13. Edhi Foundation – Pakistan’s largest welfare organization, SECP-approved for donations.
14. Prime Minister’s Flood Relief Fund – A government-established fund for disaster relief.
15. Kashmir Fund for Rehabilitation – Supports welfare in Azad Jammu and Kashmir.
16. National Trust Fund for the Disabled – Aids rehabilitation of disabled individuals.
17. Baitussalam Welfare Trust – Focuses on welfare and education for the underprivileged.
18. Akhuwat Foundation – Provides interest-free loans and welfare services, SECP-approved.

Arts, Culture, and Development

19. Mohatta Palace Gallery Trust – Promotes arts and culture, recognized by the FBR.
20. Aga Khan Development Network (Pakistan) – Supports development projects across multiple sectors.
21. Pakistan Poverty Alleviation Fund (PPAF) – A government-backed initiative for poverty reduction.

Government-Run Institutions

22. Boards of Education (Federal/Provincial) – Includes entities like the Federal Board of Intermediate and Secondary Education.
23. Provincial Relief Funds – Such as the Punjab Chief Minister’s Relief Fund for natural disasters.
24. Local Government Hospitals – Public hospitals run by city or district administrations.

Note: This list is not exhaustive, as the FBR periodically updates the Thirteenth Schedule and Clause 61 of the Second Schedule. Always verify an organization’s status with the FBR or SECP before donating to ensure eligibility for the tax credit.

Why Claim the Tax Credit?

Beyond the obvious tax savings, claiming this credit supports Pakistan’s social welfare ecosystem. Donations to approved entities fund education, healthcare, and relief efforts—areas critical to national development. Plus, with the FBR’s ongoing efforts to digitize tax filing (via the IRIS portal as of 2025), claiming your credit is easier than ever. It’s a win-win: you save on taxes while making a difference.

How to Claim the Tax Credit in 2025

Ready to claim your tax credit for charitable donations u/s 61? Follow these steps:

1. Gather Proof: Keep receipts or bank statements for cash donations and valuation documents for property.
2. File Your Return: Log into the FBR’s IRIS portal, enter your donation details under the tax credit section, and attach supporting documents if required.if you want to learn How to File Income Tax Return in Pakistan – Complete Guide 2025 you can get the guaidelines from this.
3. Verify Eligibility: Double-check that your chosen organization is on the FBR’s approved list or meets Section 61 criteria.
4. Submit by Deadline: For the 2025 tax year, ensure your return is filed by the FBR’s deadline (typically September 30, subject to extensions).

Latest Updates for 2025

As of March 06, 2025, the FBR has emphasized transparency and compliance. Recent clarifications ensure that only donations to SECP-approved nonprofits or government-run entities qualify. The ordinance also aligns with broader tax reforms, encouraging digital payments and record-keeping. Taxpayers should stay updated via the FBR website for any last-minute changes.

Common Questions About Section 61

Can I claim a credit for donations to any charity?

No, only donations to organizations specified under Section 61 or approved by the SECP qualify.

What if I donate more than the cap?

Excess donations won’t earn a credit but can still be a deductible allowance under other sections, if applicable.

Is the credit available for overseas donations?

No, this applies only to donations within Pakistan to approved entities.

The tax credit for charitable donations u/s 61 is a fantastic way to reduce your tax liability while supporting worthy causes in Pakistan. Whether you’re an individual giving to a local school or a company funding a hospital, this provision rewards your generosity with real financial benefits. With the FBR’s streamlined processes in 2025, claiming this credit is straightforward—so long as you donate to approved centers like those listed above and follow the rules.

Ready to make a difference and save on taxes? Review your charitable contributions, ensure they meet Section 61 requirements, and file your claim today. For more details, you can visit Maximizing Tax Deductions: Using the FBR Calculator to Lower Your Liability to check the other leagal option to dcrease the tax burden.