Businesses can claim deductions for qualifying employee education, healthcare and training expenditure under Section 27
ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the tax deductions available to businesses for certain employee training, education and welfare-related expenditure during Tax Year 2027.
Through the Income Tax Ordinance, 2001, updated up to June 30, 2026, the FBR has explained the provisions of Section 27, which allow taxpayers to claim deductions for qualifying non-capital expenditure incurred on employee education, healthcare and training.
Expenditure eligible for deduction
Under Section 27, a person may claim a deduction for expenditure incurred during a tax year, other than capital expenditure, in respect of specified employee training and welfare facilities.
The provision covers expenditure on several categories.
Educational institutions and hospitals
Businesses can claim a deduction for expenditure incurred on an educational institution or hospital established in Pakistan for the benefit of their employees and their dependants.
The provision allows employers to obtain tax relief for qualifying facilities established to meet the education and healthcare needs of their workforce and their families.
Industrial worker training institutes
A deduction is also available for expenditure incurred on an institute established in Pakistan for the training of industrial workers.
The institute must be recognised, aided or operated by the Federal Government, a Provincial Government or a Local Government.
This provision supports employer spending on formal training facilities aimed at improving the skills of industrial workers.
Training under an FBR-approved scheme
The law also permits a deduction for expenditure incurred on the training of a person who is a citizen of Pakistan, where the training is provided under a scheme approved by the FBR for the purposes of Section 27.
Businesses therefore need to ensure that training expenditure claimed under this provision relates to a scheme that satisfies the relevant FBR approval requirements.
Tax incentive for workforce development
The provision effectively provides businesses with a tax incentive to invest in employee welfare and skills development.
By allowing eligible expenditure to be deducted when calculating taxable business income, the government seeks to encourage employers to support education, healthcare and workforce training.
The measure can also help businesses develop a more skilled workforce while providing tax relief for qualifying non-capital expenditure.
Records required for Tax Year 2027
Businesses claiming the deduction should ensure that their expenditure falls within the categories specified under Section 27 and maintain appropriate records to substantiate their claims.
Relevant documentation should establish the nature of the expenditure, the facility or training involved, its connection with employees or eligible trainees and, where applicable, the recognition or approval required under the law.
The FBR’s updated Income Tax Ordinance provides the legal framework for determining whether employee education, healthcare, training and related expenditure qualifies for deduction in Tax Year 2027.