Karachi, May 4, 2025 – The Pakistan Stock Exchange (PSX) has urged the Federal Board of Revenue (FBR) to reinstate tax credits for the salaried class investing in the capital market.
In its detailed budget proposals for FY2025-26, the PSX emphasized that restoring these credits would be instrumental in encouraging long-term savings and strengthening participation in the formal investment ecosystem.
The PSX noted that tax credits are particularly important for small-scale investors, especially salaried individuals, who often rely on modest savings to plan for retirement or meet major financial goals. These savings, when directed towards the capital market, not only help individuals build financial security but also contribute to the broader economy by supporting equity and debt markets, including government securities.
In its submission, the PSX warned that the removal of tax credits under the Finance Act 2022 has had a discouraging effect on retail investor participation. The withdrawal of incentives that previously applied to investments in new shares, mutual funds, sukuks, and life insurance policies is believed to have redirected public funds toward informal or undocumented investment avenues offering higher returns but lacking transparency.
The PSX has specifically proposed the reinstatement of Section 62 of the Income Tax Ordinance, 2001. This provision allowed tax credits for individual investors, encouraging disciplined savings behavior. According to the PSX, bringing back Section 62 would have minimal impact on government revenue while delivering long-term benefits by cultivating a savings-oriented culture among citizens.
In its rationale, the PSX highlighted that the tax credits under Section 62 had historically served as a key motivator for individuals to invest in regulated financial instruments. For a country like Pakistan, where the savings rate lags behind regional peers, such incentives are not only beneficial—they are necessary. The PSX also pointed out that similar investment-linked tax incentives are widely used in other countries to support retirement savings and ensure financial inclusion.
Reinstating these credits could act as a catalyst in reviving retail investor interest and promoting formal investment practices, especially among the salaried class that forms a substantial segment of Pakistan’s working population.