As per Lawkidunya, In Pakistan, Section 155 of the Income Tax Ordinance, 2001, provides for various deductions that taxpayers can claim while computing their taxable income. These deductions are designed to reduce the tax burden on taxpayers and encourage investments in certain sectors. In this article, we will provide a comprehensive guide to Section 155 income tax deductions in Pakistan, including the types of deductions, eligibility criteria, and documentation requirements.

Types of Deductions Under Section 155

Section 155 of the Income Tax Ordinance, 2001, provides for the following types of deductions:
1. Charitable Donations: Donations made to approved charitable institutions, such as hospitals, schools, and welfare organizations, are eligible for deduction.
2. Zakat and Ushr: Zakat and Ushr paid by taxpayers are eligible for deduction.
3. Investment in Shares: Investment in shares of listed companies is eligible for deduction, subject to certain conditions.
4. Investment in Modaraba: Investment in Modaraba (Islamic financing) is eligible for deduction, subject to certain conditions.
5. Investment in Pakistan Banao Certificates: Investment in Pakistan Banao Certificates, a type of bond issued by the Government of Pakistan, is eligible for deduction.
6. Donations to Approved Educational Institutions: Donations made to approved educational institutions, such as universities and colleges, are eligible for deduction.
7. Donations to Approved Healthcare Institutions: Donations made to approved healthcare institutions, such as hospitals and clinics, are eligible for deduction.

Eligibility Criteria

To be eligible for deductions under Section 155, taxpayers must meet the following criteria:

1. Taxpayer must be a resident: Only resident taxpayers are eligible for deductions under Section 155.
2. Taxpayer must have a valid National Tax Number (NTN): Taxpayers must have a valid NTN to claim deductions under Section 155.
3. Donations must be made to approved institutions: Donations must be made to institutions approved by the Federal Board of Revenue (FBR) to be eligible for deduction.
4. Investments must be made in eligible securities: Investments must be made in securities eligible for deduction under Section 155, such as listed shares and Modaraba.

Documentation Requirements

Taxpayers must maintain proper documentation to support their claims for deductions under Section 155. The following documents are typically required:

1. Receipts for donations: Taxpayers must obtain receipts from the approved institutions to which donations were made.
2. Investment certificates: Taxpayers must obtain investment certificates from the eligible securities in which investments were made.
3. Bank statements: Taxpayers must maintain bank statements to support their claims for deductions.
4. Taxpayer’s NTN certificate: Taxpayers must maintain their NTN certificate to support their claims for deductions.

Conclusion

Section 155 of the Income Tax Ordinance, 2001, provides for various deductions that taxpayers can claim while computing their taxable income. These deductions are designed to reduce the tax burden on taxpayers and encourage investments in certain sectors. Taxpayers must meet the eligibility criteria and maintain proper documentation to support their claims for deductions. By understanding the provisions of Section 155, taxpayers can take advantage of the deductions available and minimize their tax liability.

What Types of Deductions are Available Under Section 155

Under Section 155 of the Income Tax Ordinance, 2001, the following types of deductions are available:
Charitable Donations
Donations made to approved charitable institutions, such as:
1. Hospitals
2. Schools
3. Welfare organizations
4. Religious institutions

Zakat and Ushr
Zakat and Ushr paid by taxpayers are eligible for deduction.

Investment in Shares

Investment in shares of listed companies is eligible for deduction, subject to certain conditions:
1. The shares must be listed on a stock exchange in Pakistan.
2. The investment must be made in a company that is engaged in a business that is eligible for deduction under Section 155.

Investment in Modaraba

Investment in Modaraba (Islamic financing) is eligible for deduction, subject to certain conditions:
1. The Modaraba must be registered with the Securities and Exchange Commission of Pakistan (SECP).
2. The investment must be made in a Modaraba that is engaged in a business that is eligible for deduction under Section 155.

Investment in Pakistan Banao Certificates

Investment in Pakistan Banao Certificates, a type of bond issued by the Government of Pakistan, is eligible for deduction.

Donations to Approved Educational Institutions

Donations made to approved educational institutions, such as:
1. Universities
2. Colleges
3. Schools

Donations to Approved Healthcare Institutions

Donations made to approved healthcare institutions, such as:
1. Hospitals
2. Clinics
3. Medical research institutions

Other Deductions

Other deductions available under Section 155 include:
1. Donations to the Prime Minister’s Relief Fund
2. Donations to the President’s Relief Fund
3. Donations to approved institutions for the welfare of disabled persons

Who is Eligible For Deductions Under Section 155

To be eligible for deductions under Section 155 of the Income Tax Ordinance, 2001, the following conditions must be met:
1. Resident Taxpayer: The taxpayer must be a resident of Pakistan.
2. Valid National Tax Number (NTN): The taxpayer must have a valid NTN.
3. Income Tax Return: The taxpayer must have filed their income tax return for the tax year in which the deduction is being claimed.
4. Donations and Investments: The taxpayer must have made donations or investments in eligible institutions or securities.
5. Documentation: The taxpayer must maintain proper documentation to support their claims for deductions.

Eligible Taxpayers

The following taxpayers are eligible for deductions under Section 155:
1. Individuals: Resident individuals who have filed their income tax return.
2. Companies: Resident companies that have filed their income tax return.
3. Association of Persons (AOPs): Resident AOPs that have filed their income tax return.
4. Trusts: Resident trusts that have filed their income tax return.

Ineligible Taxpayers

The following taxpayers are not eligible for deductions under Section 155:
1. Non-Resident Taxpayers: Non-resident taxpayers are not eligible for deductions under Section 155.
2. Taxpayers with Unpaid Taxes: Taxpayers who have unpaid taxes or have failed to file their income tax return are not eligible for deductions under Section 155.
3. Taxpayers with Incomplete Documentation: Taxpayers who do not maintain proper documentation to support their claims for deductions are not eligible for deductions under Section 155.