Question 1

Who it applies to

Accepted Answer

Anyone claiming an exemption or concession: employees, pensioners, NPOs, funds, SEZ and specified businesses

Question 2

Structure and contents

Accepted Answer

Part / area What it covers Part I Exemptions from total income: the income is not taxed at all (for example clause 13 gratuity, clause 139 medical, clause 58A non-profit universities, clause 126E SEZ enterprises) Part II Reduction in tax rates (for example clause 1, flying and submarine allowance at 2.5%) Part III Reduction in tax liability (for example clause 2, 25% reduction for teachers and researchers; clause 19, 25% for women-led startups) Part IV Exemption from specific provisions: withholding (s.148, s.151, s.153), minimum tax (s.113), audit and so on

Question 3

How it works in practice

Accepted Answer

Find the clause that matches the income and the person, then meet every condition in it (NTN, certificate, deadline, approval). Exemptions are read strictly, and the burden of proof is on you. Many exemptions also need an exemption certificate under s.159 to stop withholding.

Question 4

Key clauses

Accepted Answer

Search clauses Part Clause Subject What it does Part I cl. 5A Government allowances abroad Salary Allowances or perquisites paid outside Pakistan by the Government to a citizen serving abroad. Part I cl. 9 Family pension Salary Pension granted to the families and dependants of public servants or armed forces members who die in service. (Ordinary pensions are now taxed: 0% up to Rs 10 million, 5% above.) Part I cl. 12 Commutation of pension Salary Commutation of pension received from the Government or an FBR-approved pension scheme. Part I cl. 13 Gratuity Salary Exempt: government employees per service rules; approved gratuity fund in full; FBR-approved scheme up to Rs 300,000; otherwise the lower of 50% or Rs 75,000. Not for payments received abroad, non-employee directors, non-residents, or a second gratuity. Part I cl. 16 Shaheed family pensions Salary Special family pension, dependants' pension and children's allowance of families of Shaheeds of the armed forces. Part I cl. 19 Leave encashment (LPR) Salary Encashment of leave preparatory to retirement of armed forces members and federal or provincial government employees. Part I cl. 22 Provident Funds Act fund Salary Payments from a provident fund governed by the Provident Funds Act 1925. Part I cl. 23 Recognised provident fund Salary Accumulated balance payable to an employee from a recognised provident fund. Part I cl. 23A Voluntary pension (VPS) Salary Up to 50% of the accumulated VPS balance withdrawn on retirement, disability or death. Part I cl. 24 Benevolent Fund grants Salary Grants under the Central Employees Benevolent Fund and Group Insurance Act 1969. Part I cl. 26 Workers' Participation Fund Salary Amounts received by a worker from the Workers' Participation Fund. Part I cl. 39A Armed forces allowances Salary Internal security, kit, ration, special messing, SSG, Northern Areas and height allowances. Part I cl. 53A Zero-cost perquisites Salary Free or subsidised food in hotels and restaurants, education at the employer's school, and medical treatment at the employer's hospital, provided to staff. Part I cl. 55–56 Judges' perquisites Salary Official residence or house rent, official car, and specified allowances of Supreme Court and High Court judges. Part I cl. 139 Medical facility and allowance Salary (a) Free medical treatment, hospitalisation or reimbursement under the terms of employment is exempt (hospital NTN and employer attestation needed). (b) Medical allowance up to 10% of basic salary is exempt if no free treatment or reimbursement is provided. Part I cl. 149 Foreign-national salary Salary Salary of non-resident foreign technicians or international buying house staff paid from abroad, subject to conditions. Part I cl. 57 Funds and trusts Funds & NPOs Income of recognised provident, approved superannuation, gratuity and pension funds, and of listed national institutions. Part I cl. 58A Non-profit education Funds & NPOs Income of a university or educational institution run by a non-profit organisation solely for education. Part I cl. 59–60 Charitable and religious income Funds & NPOs Income of trusts held for religious or charitable purposes and applied in Pakistan; voluntary contributions to religious or charitable institutions. Part I cl. 66 Named welfare institutions Funds & NPOs Income of institutions such as the Edhi Foundation, Al-Shifa Trust and Fatimid Foundation. Part I cl. 126 Public sector universities Funds & NPOs Income of public sector universities established solely for education. Part I cl. 142 Social security institutions Funds & NPOs Social security contributions received by the provincial employees' social security institutions. Part I cl. 78 Foreign currency accounts Investments Profit on certain foreign currency accounts and certificates (subject to conditions in the clause). Part I cl. 79 NRVA / NRBVA accounts Investments Profit on rupee accounts of non-residents funded only by foreign exchange remittances. Part I cl. 99 Mutual funds and REITs Investments Income of collective investment schemes and REITs that distribute at least 90% of accounting income. Part I cl. 99A Property to REITs Investments Gains on sale of immovable property or SPV shares to a REIT scheme within the time limit. Part I cl. 99C PE and VC funds Investments Income of private equity and venture capital funds distributing at least 90% of accounting income. Part I cl. 103A Group dividends Investments Inter-corporate dividends within a group taxed under s.59AA, if the group return is filed. Part I cl. 114B Property allotted for service Investments First sale of property allotted to specified persons (such as armed forces personnel) for services rendered. Part I cl. 126E Special Economic Zones Business Income of zone enterprises for 10 years from commercial operation (or up to 30 June 2035), and of zone developers for 10 years. Part I cl. 132 Power projects Business Profits of power generation projects set up since 1988, subject to conditions. Part I cl. 145A Erstwhile tribal areas Business Income not taxable before the 25th Amendment, of residents of the former FATA/PATA, up to 30 June 2026. Part I cl. 147 Housing authorities Business Income of FGEHA and Naya Pakistan Housing and Development Authority for the specified years. Part II cl. 1 Flying and submarine allowance Reduced rate Taxed at 2.5% as a separate block for pilots, flight engineers, navigators and submarine officers. Part II cl. 5A–5AC Reduced withholding for specified payees Reduced rate Reduced rates under s.151 and s.152(2) for specified foreign lenders and cases. Part II cl. 24A–24D Reduced s.153 and minimum tax rates Reduced rate Lower rates under s.153 and s.113 for specified sectors and supplies. Part III cl. 2 Teachers and researchers Reduced liability 25% reduction in tax on salary of full-time teachers and researchers in HEC-recognised non-profit institutions and government research institutions. Part III cl. 9 / 9B Low-cost housing Reduced liability 50% reduction for low-cost housing projects; 90% reduction for NAPHDA or Ehsaas low-cost housing projects. Part III cl. 17 Cotton ginners Reduced liability Tax limited to 1% of turnover from lint, seed, oil and cake (final for those activities). Part III cl. 19 Women-led startups Reduced liability 25% reduction in tax on business income of women's startups established from 1 July 2021. Part IV cl. 11A Minimum tax exclusions Exempt from section Minimum tax under s.113 does not apply to listed persons such as NIT, mutual funds and REITs. Part IV cl. 47A Resale of imported goods Exempt from section s.153 withholding does not apply to the sale of goods the seller imported and paid s.148 tax on. Part IV cl. 47B Payments to funds Exempt from section No withholding under s.150, s.151 and s.233 on payments to NIT, mutual funds, pension funds, REITs and recognised funds. Part IV cl. 56 Import exemptions Exempt from section s.148 does not apply to specified imports. Part IV cl. 59 Profit on debt exemptions Exempt from section s.151 does not apply to specified recipients. Part IV cl. 98 Pakistani-flag ships Exempt from section No s.148 on import of ships and specialised crafts flying the Pakistani flag, up to 2030. Part IV cl. 103 Bahbood and Pensioners' Benefit Exempt from section Profit on Bahbood certificates and Pensioners' Benefit Accounts is taxed under Division I slabs instead of the FTR. Part IV cl. 105 Recently audited Exempt from section No selection for audit under s.177 or s.214C if audited in any of the last 3 years, unless the Board approves.

Part / area	What it covers
Part I	Exemptions from total income: the income is not taxed at all (for example clause 13 gratuity, clause 139 medical, clause 58A non-profit universities, clause 126E SEZ enterprises)
Part II	Reduction in tax rates (for example clause 1, flying and submarine allowance at 2.5%)
Part III	Reduction in tax liability (for example clause 2, 25% reduction for teachers and researchers; clause 19, 25% for women-led startups)
Part IV	Exemption from specific provisions: withholding (s.148, s.151, s.153), minimum tax (s.113), audit and so on

Part	Clause	Subject	What it does
Part I	cl. 5A	Government allowances abroadSalary	Allowances or perquisites paid outside Pakistan by the Government to a citizen serving abroad.
Part I	cl. 9	Family pensionSalary	Pension granted to the families and dependants of public servants or armed forces members who die in service. (Ordinary pensions are now taxed: 0% up to Rs 10 million, 5% above.)
Part I	cl. 12	Commutation of pensionSalary	Commutation of pension received from the Government or an FBR-approved pension scheme.
Part I	cl. 13	GratuitySalary	Exempt: government employees per service rules; approved gratuity fund in full; FBR-approved scheme up to Rs 300,000; otherwise the lower of 50% or Rs 75,000. Not for payments received abroad, non-employee directors, non-residents, or a second gratuity.
Part I	cl. 16	Shaheed family pensionsSalary	Special family pension, dependants' pension and children's allowance of families of Shaheeds of the armed forces.
Part I	cl. 19	Leave encashment (LPR)Salary	Encashment of leave preparatory to retirement of armed forces members and federal or provincial government employees.
Part I	cl. 22	Provident Funds Act fundSalary	Payments from a provident fund governed by the Provident Funds Act 1925.
Part I	cl. 23	Recognised provident fundSalary	Accumulated balance payable to an employee from a recognised provident fund.
Part I	cl. 23A	Voluntary pension (VPS)Salary	Up to 50% of the accumulated VPS balance withdrawn on retirement, disability or death.
Part I	cl. 24	Benevolent Fund grantsSalary	Grants under the Central Employees Benevolent Fund and Group Insurance Act 1969.
Part I	cl. 26	Workers' Participation FundSalary	Amounts received by a worker from the Workers' Participation Fund.
Part I	cl. 39A	Armed forces allowancesSalary	Internal security, kit, ration, special messing, SSG, Northern Areas and height allowances.
Part I	cl. 53A	Zero-cost perquisitesSalary	Free or subsidised food in hotels and restaurants, education at the employer's school, and medical treatment at the employer's hospital, provided to staff.
Part I	cl. 55–56	Judges' perquisitesSalary	Official residence or house rent, official car, and specified allowances of Supreme Court and High Court judges.
Part I	cl. 139	Medical facility and allowanceSalary	(a) Free medical treatment, hospitalisation or reimbursement under the terms of employment is exempt (hospital NTN and employer attestation needed). (b) Medical allowance up to 10% of basic salary is exempt if no free treatment or reimbursement is provided.
Part I	cl. 149	Foreign-national salarySalary	Salary of non-resident foreign technicians or international buying house staff paid from abroad, subject to conditions.
Part I	cl. 57	Funds and trustsFunds & NPOs	Income of recognised provident, approved superannuation, gratuity and pension funds, and of listed national institutions.
Part I	cl. 58A	Non-profit educationFunds & NPOs	Income of a university or educational institution run by a non-profit organisation solely for education.
Part I	cl. 59–60	Charitable and religious incomeFunds & NPOs	Income of trusts held for religious or charitable purposes and applied in Pakistan; voluntary contributions to religious or charitable institutions.
Part I	cl. 66	Named welfare institutionsFunds & NPOs	Income of institutions such as the Edhi Foundation, Al-Shifa Trust and Fatimid Foundation.
Part I	cl. 126	Public sector universitiesFunds & NPOs	Income of public sector universities established solely for education.
Part I	cl. 142	Social security institutionsFunds & NPOs	Social security contributions received by the provincial employees' social security institutions.
Part I	cl. 78	Foreign currency accountsInvestments	Profit on certain foreign currency accounts and certificates (subject to conditions in the clause).
Part I	cl. 79	NRVA / NRBVA accountsInvestments	Profit on rupee accounts of non-residents funded only by foreign exchange remittances.
Part I	cl. 99	Mutual funds and REITsInvestments	Income of collective investment schemes and REITs that distribute at least 90% of accounting income.
Part I	cl. 99A	Property to REITsInvestments	Gains on sale of immovable property or SPV shares to a REIT scheme within the time limit.
Part I	cl. 99C	PE and VC fundsInvestments	Income of private equity and venture capital funds distributing at least 90% of accounting income.
Part I	cl. 103A	Group dividendsInvestments	Inter-corporate dividends within a group taxed under s.59AA, if the group return is filed.
Part I	cl. 114B	Property allotted for serviceInvestments	First sale of property allotted to specified persons (such as armed forces personnel) for services rendered.
Part I	cl. 126E	Special Economic ZonesBusiness	Income of zone enterprises for 10 years from commercial operation (or up to 30 June 2035), and of zone developers for 10 years.
Part I	cl. 132	Power projectsBusiness	Profits of power generation projects set up since 1988, subject to conditions.
Part I	cl. 145A	Erstwhile tribal areasBusiness	Income not taxable before the 25th Amendment, of residents of the former FATA/PATA, up to 30 June 2026.
Part I	cl. 147	Housing authoritiesBusiness	Income of FGEHA and Naya Pakistan Housing and Development Authority for the specified years.
Part II	cl. 1	Flying and submarine allowanceReduced rate	Taxed at 2.5% as a separate block for pilots, flight engineers, navigators and submarine officers.
Part II	cl. 5A–5AC	Reduced withholding for specified payeesReduced rate	Reduced rates under s.151 and s.152(2) for specified foreign lenders and cases.
Part II	cl. 24A–24D	Reduced s.153 and minimum tax ratesReduced rate	Lower rates under s.153 and s.113 for specified sectors and supplies.
Part III	cl. 2	Teachers and researchersReduced liability	25% reduction in tax on salary of full-time teachers and researchers in HEC-recognised non-profit institutions and government research institutions.
Part III	cl. 9 / 9B	Low-cost housingReduced liability	50% reduction for low-cost housing projects; 90% reduction for NAPHDA or Ehsaas low-cost housing projects.
Part III	cl. 17	Cotton ginnersReduced liability	Tax limited to 1% of turnover from lint, seed, oil and cake (final for those activities).
Part III	cl. 19	Women-led startupsReduced liability	25% reduction in tax on business income of women's startups established from 1 July 2021.
Part IV	cl. 11A	Minimum tax exclusionsExempt from section	Minimum tax under s.113 does not apply to listed persons such as NIT, mutual funds and REITs.
Part IV	cl. 47A	Resale of imported goodsExempt from section	s.153 withholding does not apply to the sale of goods the seller imported and paid s.148 tax on.
Part IV	cl. 47B	Payments to fundsExempt from section	No withholding under s.150, s.151 and s.233 on payments to NIT, mutual funds, pension funds, REITs and recognised funds.
Part IV	cl. 56	Import exemptionsExempt from section	s.148 does not apply to specified imports.
Part IV	cl. 59	Profit on debt exemptionsExempt from section	s.151 does not apply to specified recipients.
Part IV	cl. 98	Pakistani-flag shipsExempt from section	No s.148 on import of ships and specialised crafts flying the Pakistani flag, up to 2030.
Part IV	cl. 103	Bahbood and Pensioners' BenefitExempt from section	Profit on Bahbood certificates and Pensioners' Benefit Accounts is taxed under Division I slabs instead of the FTR.
Part IV	cl. 105	Recently auditedExempt from section	No selection for audit under s.177 or s.214C if audited in any of the last 3 years, unless the Board approves.