Restructuring of Entitlement to Exemption

Restructuring of Entitlement to Exemption under clause 66: The Finance Act, 2025 has brought about certain amendments in the Income Tax Ordinance, 2001 (the Ordinance, hereafter). Some significant amendments are explained hereunder:

Previously, the entities representing institutions, foundations, societies, boards, trust and funds were classified into two broad categories. The Table I, entities enjoyed complete exemption on their any income for a tax year and entities in Table II were given the same privilege subject to such conditions and limitations as specified in section 100C of the Ordinance.

Through Finance Act, 2025 both the Tables have been reorganized to do away with blanket exemptions unless there are any rational basis. Consequently, the entities with whom Government of Pakistan have entered into a sovereign agreement and those which have been established for carrying out the purposes of Government of Pakistan would continue to the entitlement of un-conditional exemption on their any head of income and have been placed under clause (57) of Part I of the Second Schedule to the Ordinance.

The rest of the entities, which have characteristics of Non-Profit Organization, are placed in a single Table and that table continues to be part of clause (66) of Part I of the Second Schedule and these will be entitled to hundred percent tax credit on their any income subject to the conditions and limitations as specified in section 100C of the Ordinance.

To know more about our Taxation related advisory click the link Taxation Services for more updates on taxes from FBR click here.