Written by Akhter Syed in Taxation Income Tax Rules 2002 specify five categories of eligible entertainment expenditure, subject to business-related conditions and restrictions under Section 21(d). The Federal Board of Revenue (FBR) has allowed businesses to claim conditional deductions for entertainment expenditure against business income during Tax Year 2027, subject to prescribed legal requirements. According to the Income Tax Rules, 2002, updated on September 15, 2026, entertainment expenses are deductible under specified conditions in accordance with Section 21(d) and Section 20 of the Income Tax Ordinance, 2001. The rules cover five categories of eligible entertainment expenditure: 1. Expenses incurred outside Pakistan on entertainment connected with business transactions or allocated as head office expenditure. 2. Entertainment expenses in Pakistan for foreign customers and suppliers. 3. Entertainment of customers and clients at business premises. 4. Entertainment expenses during meetings of shareholders, agents, directors or…