Karachi, May 12, 2025 – The Karachi Tax Bar Association (KTBA) has called on the government to abolish the tax on surplus funds of Non-Profit Organizations (NPOs) in the upcoming federal budget for 2025–26.
In its official budget proposals submitted to the Federal Board of Revenue (FBR), the KTBA emphasized the need to support charitable and welfare-driven institutions that play a crucial role in public service.
The KTBA specifically pointed to Section 100C of the Income Tax Ordinance, 2001, which deals with the taxation of NPOs. According to KTBA, Sub-section (5) of Section 100C imposes a 10% tax on surplus funds held by NPOs at the end of a financial year.
KTBA argued that this tax creates unnecessary financial stress for NPOs, many of which run hospitals, schools, and other welfare projects. These organizations often need to save funds for large capital expenditures—such as buildings, infrastructure, and medical or educational equipment—that are planned over several years. Such long-term planning is vital to sustain and grow their operations.
“NPOs must retain funds for ongoing and future welfare projects,” said a KTBA spokesperson. “Taxing these surplus amounts discourages savings and planning, and may force NPOs to compromise on their service delivery.”
The KTBA reiterated that there are no provisions within the Income Tax Ordinance that restrict NPOs from using retained surplus for welfare purposes in future years. Therefore, the 10% tax under Sub-section (5) appears inconsistent with the spirit of encouraging charitable work.
KTBA proposed that Sub-section (5) of Section 100C be completely abolished in order to allow NPOs to retain their surplus funds without penalty. The change, they believe, would directly support the financial health of NPOs and encourage long-term planning for welfare services.
By removing this tax, KTBA believes the government would be sending a strong message of support to NPOs working tirelessly across Pakistan for public benefit.