Karachi, September 10, 2024 – In a significant development for taxpayers, the Federal Board of Revenue (FBR) has announced that individuals will be allowed to deduct Zakat payments against their income tax liability for the tax year 2024-25.
The FBR made this announcement after updating the Income Tax Ordinance, 2001, up to June 30, 2024, continuing its policy of permitting Zakat deductions for tax filers.
According to the FBR, under Section 60 of the Income Tax Ordinance, 2001, individuals are entitled to a deductible allowance for Zakat paid during the tax year under the Zakat and Ushr Ordinance, 1980. The provision allows taxpayers to reduce their taxable income by the amount of Zakat they have paid, thus lowering their overall tax liability. This step is in line with the government’s efforts to provide relief to taxpayers who contribute to religious and social obligations through Zakat.
The FBR elaborated on the specifics of Section 60, explaining that the deduction is applicable only for Zakat payments made in accordance with the provisions of the Zakat and Ushr Ordinance, 1980. However, the provision does not apply to Zakat that has already been accounted for under subsection (2) of Section 40 of the Income Tax Ordinance.
The FBR further clarified that any allowance or portion of an allowance under Section 60 that cannot be fully deducted in a tax year will not be refunded, nor can it be carried forward to a subsequent tax year or back to a preceding tax year. This restriction ensures that Zakat deductions are applied solely within the relevant tax year and cannot be adjusted for other periods.
In addition to Zakat deductions, the FBR also confirmed the continuation of allowances for payments made towards the Workers’ Welfare Fund (WWF) and Workers’ Participation Fund (WPF) under Sections 60A and 60B of the Income Tax Ordinance, respectively. Taxpayers who contribute to the WWF under the Workers’ Welfare Fund Ordinance, 1971, or equivalent provincial laws enacted after the 18th Constitutional Amendment, will be eligible for a deductible allowance on their tax liabilities.
Similarly, under Section 60B, taxpayers contributing to the Workers’ Participation Fund in accordance with the Companies Profit (Workers’ Participation) Act, 1968, or under provincial laws, will also be eligible for a deductible allowance.
These tax relief measures are aimed at encouraging social welfare contributions and providing financial benefits to taxpayers who engage in such activities. The FBR’s updated ordinance reflects the government’s continued commitment to balancing tax obligations with social welfare incentives, promoting both compliance and philanthropy within the tax framework of Pakistan.
