Section 61 of Income Tax Ordinance, 2001 has allowed tax credit against amount paid as charitable donations.
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Section 61 of the Income Tax Ordinance, 2001:
61. Charitable donations.— (1) A person shall be entitled to a tax credit in respect of any sum paid, or any property given by the person in the tax year as a donation, voluntary contribution or subscription to —
(a) any board of education or any university in Pakistan established by, or under, a Federal or a Provincial law;
(b) any educational institution, hospital or relief fund established or run in Pakistan by Federal Government or a Provincial Government or a Local Government; or
(c) any non-profit organization or any person eligible for tax credit under section 100C of this Ordinance; or
(d) entities, organizations and funds mentioned in the Thirteenth Schedule to this Ordinance.
(2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely:—
(A/B) x C
A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part;
B is the person’s taxable income for the tax year; and
C is the lesser of —
(a) the total amount of the person’s donations referred to in sub-section (1) in the year, including the fair market value of any property given; or
(b) where the person is —
(i) an individual or association of persons, thirty per cent of the taxable income of the person for the year; or
(ii) a company, twenty per cent of the taxable income of the person for the year 2:
Provided that where any sum is paid or any property is given to an associate by a donor, clause (b) of component C shall be, in the case of—
(i) an individual or association of persons, fifteen percent of the taxable income of the person for the year; or
(ii) a company, ten percent of the taxable income of the person for the year.
(3) For the purposes of clause (a) of component C of the formula in sub-section (2), the fair market value of any property given shall be determined at the time it is given.
(4) A cash amount paid by a person as a donation shall be taken into account under clause (a) of component C1 of sub-section (2) only if it was paid by a crossed cheque drawn on a bank.
(5) The Board may make rules regulating the procedure of the grant of approval under sub-clause (c) of clause (36) of section 2 and any other matter connected with, or incidental to, the operation of this section.
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