Karachi, May 18, 2025 – The Karachi Tax Bar Association (KTBA) has called for the restoration of a 40% tax credit on income earned by qualified teachers and researchers in its detailed budget proposals for the fiscal year 2025-26.
In a document submitted to the Federal Board of Revenue (FBR), the KTBA emphasized the need to reinstate the original tax credit under Clause (2) of Part III of the Second Schedule to the Income Tax Ordinance, 2001. The association noted that this incentive was initially introduced to recognize and reward the contribution of full-time teachers and researchers working in Pakistan’s non-profit educational and research institutions.
The tax credit, which was set at 40% for many years, was unfortunately reduced to 25% in 2019. The KTBA argues that this reduction has negatively impacted the financial well-being of genuine teachers and researchers who dedicate their professional lives to education and academic innovation. These individuals often work at institutions recognized by the Higher Education Commission (HEC) or at government-affiliated training and research centers.
Highlighting the significant role that teachers and researchers play in nation-building, the KTBA urged the government to restore the full 40% tax credit. It argued that rather than penalizing the entire sector due to isolated instances of misuse, the authorities should implement stricter monitoring and enforcement measures to prevent abuse of the tax incentive. Monitoring tax withholding at source could help ensure that only eligible individuals benefit from the provision.
“The reduction in tax credit has added to the hardship faced by qualified professionals in the academic and research sectors,” the KTBA stated. “Restoring the original 40% rebate would not only provide them financial relief but also serve as a motivation for excellence in education and research.”
The proposal reflects the broader vision of promoting a knowledge-based economy by incentivizing the contributions of teachers and researchers, who remain at the core of Pakistan’s educational development and intellectual progress.