Islamabad, September 17, 2025 – The Federal Board of Revenue (FBR) has announced that Zakat will continue to be treated as a deductible allowance for taxpayers during the tax year 2025-26.
The provision is part of the updated Income Tax Ordinance, 2001, which reaffirms the government’s policy of extending relief to individuals who contribute through Zakat under the Zakat and Ushr Ordinance, 1980.
According to Section 60 of the Ordinance, a taxpayer is entitled to claim a deductible allowance equal to the amount of Zakat paid during a tax year. This allowance can be adjusted while calculating taxable income, thereby lowering the overall tax liability of the payer. However, the law clearly specifies that the benefit is only available when Zakat is paid in accordance with the prescribed legal framework.
The section further clarifies that any Zakat accounted for under Section 40 cannot be claimed again as a deductible allowance. Additionally, if the full deduction cannot be utilized within the tax year, it cannot be refunded, carried forward to the next year, or adjusted against a previous year’s tax liability.
This measure reflects the FBR’s continuing effort to align taxation policy with Islamic principles, ensuring that contributions made under Zakat are duly recognized in the country’s taxation system.
Disclaimer: This article is for informational purposes only. Taxpayers are advised to consult professional tax advisors or refer directly to the Income Tax Ordinance, 2001 before making financial or tax-related decisions.