Section 63: Contribution to an Approved Pension Fund

3[63. Contribution to an Approved Pension Fund.— (1) An eligible person as defined in sub-section (19A) of section 2 deriving income chargeable to tax under the compute the tax payable by the taxpayer for the relevant tax years and the provisions of this Ordinance, shall, so far as may, apply accordingly. ] (2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: — (A/B) x C where— A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part; B is the person’s taxable income for the tax year; and C is the lesser of — (a) the total cost of acquiring the shares,4[or sukuks], or the total contribution or premium paid by the person referred to in sub-section (1) in the year; (b) 4[twenty] per cent of the person’s taxable income for the year; or (c) 4[ ] 4[ ] 4[two] million rupees]. (3) Where — (a) a person has been allowed a tax credit under sub-section (1) in a tax year in respect of the purchase of a share; and (b) the person has made a disposal of the share within 4[twenty-four] months of the date of acquisition, the amount of tax payable by the person for the tax year in which the shares were disposed of shall be increased by the amount of the credit allowed.” head “Salary” or the head “Income from Business” shall be entitled to a tax credit for a tax year in respect of any contribution or premium paid in the year by the person in approved pension fund under the Voluntary Pension System Rules, 2005. (2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: — (A/B) x C Where.- A is the amount of tax assessed to the person for the tax year, before allowance of any tax credit under this Part; B is the person’s taxable income for the tax year; and C is the lesser of — (i) the total contribution or premium referred to in sub-section (1) paid by the person in the year; or (ii) twenty per cent of the 1[eligible] person’s taxable income for the relevant tax year; Provided that 2[an eligible person] joining the pension fund at the age of forty-one years or above, during the first ten years 3[starting from July 1, 2006] shall be allowed Pakistan] of an insurance company duly registered under the Insurance Ordinance, 2000 (XXXIX of 2000), having its main object the provision to the person of an annuity in old age. (2) The amount of a resident individual’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: – (A/B) x C where – A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part; B is the person’s taxable income for the tax year; and C is the lesser of – (a) the total contribution or premium referred to in sub-section (1) paid by the individual in the year; (b) ten per cent of the person’s taxable income for the tax year; or (c) two hundred thousand rupees. (3) A person shall not be entitled to a tax credit under sub-section (1) in respect of a contract of annuity which provides – (a) for the payment during the life of the person of any amount besides an annuity; (b) for the annuity payable to the person to commence before the person attains the age of sixty years; (c) that the annuity is capable, in whole or part, of surrender, commutation, or assignment; or for payment of the annuity outside Pakistan.” additional contribution of 2% per annum for each year of age exceeding forty years. Provided further that the total contribution allowed to such person shall not exceed 50% of the total taxable income of the preceding year 1[2[:] ] ] 3[Provided also that the additional contribution of two percent per annum for each year of age exceeding forty years shall be allowed up to the 30th June, 2019 subject to the condition that the total contribution allowed to such person shall not exceed thirty percent of the total taxable income of the preceding year.”] 4[ ] 5[(3) The transfer by the members of approved employment pension or annuity scheme or approved occupational saving scheme of their existing balance to their individual pension accounts maintained with one or more pension fund managers shall not qualify for tax credit under this section.]

Effective date: 2001-09-13

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