Karachi, July 6, 2025 — Did you know the government’s decision to allow tax-free total income to certain groups cost the national exchequer a whopping Rs443 billion during fiscal year 2024–25? This eye-opening figure was revealed in a detailed report by the Federal Board of Revenue (FBR), highlighting the growing impact of tax exemptions on the country’s revenue base.
Compared to the previous year’s Rs293.46 billion, the cost of exempting total income from taxation has jumped by a substantial 53%. The FBR report shows that a wide array of individuals and institutions are benefiting from complete tax waivers under Part 1 of the Second Schedule of the Income Tax Ordinance, 2001.
So, who exactly qualifies for these generous tax breaks on total income?
Among the key beneficiaries are foreign governments and non-resident investors approved by the federal authorities. Any profit on debt or capital gains they earn from approved debt instruments is completely tax-free.
Pensioners are another major group enjoying this benefit. Whether you’re a retired employee of the federal or provincial governments or a veteran of the armed forces, your pension—and even commuted pension payments—remain exempt from tax. This benefit extends to their families and dependents as well.
Additionally, income generated by trustees managing recognized provident, gratuity, or superannuation funds is also exempt. The Employees Old Age Benefits Institution (EOBI), operating under the 1976 Act, likewise enjoys complete tax exemption on its total income.
Non-profit and philanthropic institutions, such as hospitals and international organizations, are shielded from income tax too—provided they meet specific legal and operational criteria. The same applies to Collective Investment Schemes and REITs, so long as they distribute at least 90% of their annual accounting income, minus capital gains, to investors.
Subsidies granted by the federal government to individuals for executing state-mandated projects are also exempt, ensuring that no tax is levied on this form of income.
Meanwhile, businesses in the energy sector continue to benefit from older exemptions. Taxpayers involved in electric power generation projects established since July 1, 1988, as well as profits from privatized entities like National Power Parks Management Company, are all protected under this tax-free regime.
With a total exemption bill now standing at Rs443 billion, the FBR’s report sheds light on the need to balance social support and revenue sustainability—especially as Pakistan looks to strengthen its fiscal base.