Tax Credits Chapter- 15
Total allowances received by pilots of any Pakistani airlines shall be taxed at a rate of 7.5%, provided
that the reduction under this clause shall be available to so much of the allowances as exceeds an
amount equal to the basic pay.- Reduction in tax liability in case of full time teacher or a researcher [Clause (2) of Part III of 2ND
Schedule]
The tax payable by a full time teacher or a researcher, employed in a non profit education or research
institution duly recognized by Higher Education Commission, a Board of Education or a University
recognized by the Higher Education Commission, including government research institution, shall be
reduced by an amount equal to 25% of tax payable on his income from salary.
Provided that this clause shall not apply to teachers of medical profession who derive
income from private medical practice or who receive share of consideration received from patients.
Example: Arif Ahmed is 69 years old and has earned following incomes during the tax year:
Taxable salary as a full time teacher from Punjab University Rs. 5 40,000
Income from other sources Rs. 200,000
You are required to compute the tax liability of Mr. Arif for the tax year 202 3.
Solution:
Rs.
Taxable salary 5 40,000
Income from other sources 200,000
Taxable income 740 ,000
COMPUTATION OF TAX LIABILITY:
Tax on Rs. 7 40,000 7 , 000
Less: senior citizen allowance @ 0% 0
7 ,0 00
Less: Tax credit to Full time teacher
( 7 ,000 x 5 40,000 / 7 40,000 ) x 25% 1, 277
Balance tax payable 5, 723- Yield or profit on Behbood and Pensioners Certificates / Accounts - Reduction in tax liability
[(Clause (6) of Part III of 2nd Schedule to the Income tax Ordinance, 2001)]
Profit on debt (yield or profit) on Behbood and Pensioners certificates or accounts under the
National Savings Scheme are not subject to deduction of tax at source and are chargeable to tax as
total / taxable income. This is contrary to all other profit on debts which are subject to deduction of
tax at source at the rate of 15 % and the tax so deducted is the final tax, except for a company.
As a result thereof, in certain cases, where the taxable income falls into a higher tax brackets, the
rate of tax on the yield or profit on Behbood and Pensioners certificates or accounts is more than 5%
as applicable on other profit on debts.
Accordingly, if the proportionate income tax payable on profit on debt (yield or profit) from
accounts exceeds 5 %, a reduction in income tax liability is allowed to the extent of such excess. As a
result the tax on such profit on debt (yield or profit) is restricted to 5 %.
Example: Mr. Nasir has provided you following information for computation of taxable income and
tax liability:
(a) Income from salary Rs. 300,000,
(b) Income from other sources Rs. 8 ,500,000
(c) Profit on Behbood Saving certificates Rs.80,000
Solution:
Mr. Nasir