Karachi, September 13, 2024 – The Federal Board of Revenue (FBR) has announced the tax credit benefits available for contributions made to approved pension funds during the tax year 2024-25. The FBR, in its updated Income Tax Ordinance, 2001 (valid as of June 30, 2024), highlighted the details under Section 63, which governs contributions to pension funds. Eligibility and Scope: As per Section 63, individuals classified as “eligible persons” under sub-section (19A) of Section 2 of the Ordinance, and who derive income chargeable under the heads “Salary” or “Income from Business,” are entitled to a tax credit. This tax credit applies to contributions made during the tax year to an approved pension fund under the Voluntary Pension System Rules, 2005. The goal of the tax credit is to incentivize long-term savings through pension funds by offering tax relief on contributions made by individuals, helping them secure financial stability for retirement. How the Tax Credit is Calculated: The FBR has provided a specific formula for calculating the tax credit: (A/B) x C, where: • A represents the amount of tax assessed before any tax credit allowances. • B is the taxable income of the person for the relevant tax year. • C is the lesser of: o The total contribution made to the pension fund during the year; or o 20% of the individual’s taxable income for the year.…