FBR sets purpose, registration, approval and asset-use conditions for organisations seeking NPO status for Tax Year 2027.
ISLAMABAD: The Federal Board of Revenue (FBR) has set out the criteria for organisations seeking recognition as non-profit organisations (NPOs) for Tax Year (TY) 2027 under the Income Tax Ordinance, 2001.
The FBR’s updated version of the Income Tax Ordinance, incorporating amendments up to June 30, 2026, specifies the conditions an organisation must fulfil to qualify as an NPO for income tax purposes.
Definition of non-profit organisation
Under the updated ordinance, a non-profit organisation means any person other than an individual that meets the prescribed conditions.
An organisation must be established for religious, educational, charitable or welfare purposes for the general public, or for the promotion of an amateur sport.
However, recreational clubs are excluded from the definition where the membership joining fee exceeds Rs1 million for any class of new members.
Registration requirement
An organisation seeking NPO status must also be formed and registered by or under any applicable law as a non-profit organisation.
The requirement ensures that an entity claiming NPO status has a formal legal basis and has been established under the relevant regulatory framework.
Registration alone, however, does not satisfy all the requirements for recognition under the tax law.
Commissioner approval required
The definition further requires the organisation to obtain approval from the Commissioner for a specified period.
The approval must be sought through an application submitted in the prescribed form and manner.
The application must be accompanied by the prescribed documents, along with any additional information or documents that may be required by the Commissioner.
This means organisations must complete the prescribed approval process in addition to fulfilling the relevant legal and operational requirements.
No private benefit from NPO assets
Another key condition relates to the use of the organisation’s assets.
None of the NPO’s assets may confer, or be capable of conferring, a private benefit on any other person.
The requirement is intended to ensure that assets remain dedicated to the organisation’s stated non-profit objectives rather than being used for the private benefit of individuals.
Conditions apply for Tax Year 2027
Organisations seeking recognition as NPOs for Tax Year 2027 will therefore need to demonstrate that they satisfy the prescribed requirements relating to their purpose, legal registration, Commissioner approval and use of assets.
The provisions form part of the Income Tax Ordinance, 2001, as updated by the FBR up to June 30, 2026.