Pilots of Pakistani airlines collectively availed tax concessions amounting to Rs430 million during the tax year 2020 on allowances received from their respective employers, according to official data made available to PkRevenue.com.
These tax concessions are granted under Clause 1(1AA) of Part 3 of the Second Schedule of the Income Tax Ordinance, 2001. The provision allows pilots to benefit from a reduced tax rate of 7.5 percent on certain allowances paid by their airlines. Notably, this concession has been in effect since 2014 and does not carry a sunset clause, meaning it remains available indefinitely unless amended by future legislation.
According to the Federal Board of Revenue (FBR), the concession applies only to the portion of allowances that exceed the basic pay of the pilots. The remaining income is taxed as per standard applicable rates.
The FBR clarified the calculation method used to determine the tax benefit. It involves analyzing data extracted from income tax returns and computing the difference in liability if those allowances had been taxed at a benchmark rate of 20 percent, instead of the reduced 7.5 percent.
The concession provides substantial relief to pilots, especially those earning significant allowances beyond their base salaries. With aviation being a high-responsibility profession, the favorable tax treatment is seen as an incentive to retain skilled talent within the Pakistani airline industry.
As of tax year 2020, this tax benefit continues to support professionals in the aviation sector, reaffirming the government’s recognition of the critical role played by pilots in national and international travel operations.