Enhancement in limit of tax credit under section 62 of the Ordinance for investment in shares, sukuks and insurance.
Enhancement in limit of tax credit under section 62: A resident individual or an AOP being original allottee of shares or sukuks is entitled to tax credit under section 62 of the Income Tax Ordinance, 2001 upon acquiring new shares offered by a public company listed on a stock exchange in Pakistan or acquiring sukuks offered by a public company listed and traded on a stock exchange in Pakistan.
Moreover, a resident individual or an AOP deriving income from salary or business can also avail such tax credit upon payment of life insurance premium to a life insurance company registered by SECP under the Insurance Ordinance, 2000.
Enhancement in limit of tax credit under section 62
The amount of tax credit allowable under section 62 of the Income Tax Ordinance, 2001 is computed according to the formula depicted here under:-
(NB) x C
Where:-
A: amount of tax assessed to the resident individual or AOP for the relevant tax year prior to the allowance of any tax credit under Part X of Chapter III;
B: taxable income of the resident individual or AOP for the relevant tax year; C: the lesser of —
(a) the total cost of acquiring the shares/sukuks or aggregate amount of
life insurance premium paid by a resident individual/AOP in the relevant tax year;
(b) 20% of the taxable income of the resident individual /AOP for the relevant tax year; or
(c) Rs. 1.5 Million
In order to incentivize investment in shares/sukuks and payment of life insurance premium the limit of Rs.1.5 Million in component “C” of the formula for computation of tax credit under section 62 of the Ordinance has been enhanced to Rs. 2 Million through the Finance Act, 2018.
