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Tax Credits: Tax credits are dealt in Chapter III Part X of the Income Tax Ordinance, 2001.

A ‘person’ is entitled to following Tax Credits in a Tax Year: a. Donations to approved NPO’s (Section 61) b. Investment in shares and insurance (Section 62) c. Contribution to an approved pension fund (Section 63) d. Profit on debt paid in respect of housing loans (Section 64) The employers shall, however, be responsible to obtain documentary evidence and for correct application of relevant provisions of law. (Circular No. 1 of 2007 dated July 2, 2007) Explanation of Terms: a. NOP’s – means any board of education or any university in Pakistan established by, or under, a Federal or a Provincial Law. OR Any educational institution, hospital or relief fund established or run in Pakistan by Federal Government or a Provincial Government or a Local Government. OR Any non-profit organization. (Section 61) b. In respect of investment in shares, the shares must be newly offered to the public by a public company listed on a stock exchange provided that the resident person is the original allottee of the shares or the shares are acquired form the Privatization Commission of Pakistan. Such shares must be retained for a period of (24) Months from the date of acquisition otherwise if disposed the tax liability shall increase by the amount of the credit allowed. Shares in relation to company includes – a modaraba certificate and the interest of a beneficiary in a trust (including units in a trust) In respect of any life insurance premium paid on a policy to a life insurance company, the company must be registered with the SECP under the Insurance Ordinance, 2000. (Section 62). c. For a contribution to an approved pension fund, a person to become eligible must be an individual Pakistani who holds a valid NTN or CNIC or NIC for overseas Pakistani issued by the National Database and Registration Authority. The contribution or premium such paid must be to an approved pension fund under the Voluntary Pension Rules, 2005. The transfer by the members of approved employment pension or annuity scheme or approved occupational saving scheme of their existing balance to their individual pension accounts maintained with one or more pension fund managers shall not qualify for tax credit under this section. (Section 63). d. For housing loan, the loan must have been acquired from a schedule bank or non-banking finance institution regulated by the SECP or from Government or the local Government or a public company listed on a registered stock exchange in Pakistan. (Section 64). (To be eligible all the above mentioned payments must be made through a cross cheque from a person’s individual account).