Tax Credit for Persons Employing Fresh Graduates
Tax credit for persons employing fresh graduates: In order to generate employment opportunities for freshly qualified graduates, a new tax credit has been provided by introducing a new section 64C in the Ordinance.
As per this section, persons employing freshly qualified graduates from a university or institution recognized by the Higher Education Commission shall be entitled to a tax credit in respect of the amount of salary paid to such freshly qualified graduates for the tax year in which such graduates are employed.
For claiming this tax credit, the term “freshly qualified graduate” has been defined to mean a person who has graduated after the first day of July, 2017 from any institution or university recognized by the Higher Education Commission. The tax credit shall be computed according to the following formula:-
(A/B) x C
A is the amount of tax assessed to the person for the tax year before allowance of tax credit; is the person’s taxable income for the tax year; and is the lesser of —
(a) the annual salary paid to the freshly qualified graduates in the tax year; and
(b) 5% of the person’s taxable income for the year.
However, the tax credit will only be allowed to the number of freshly qualified graduates as are not exceeding 15% of the total employees in the tax year.
For example, if a company employs 20 such fresh graduates in a tax year and its total employees including such fresh graduates are 100, then only annual salary of 15 fresh graduates will be counted for the purpose of computation of tax credit.