Tax credits, in plain words

A credit is stronger than a deduction

A deduction reduces the income that gets taxed. A tax credit reduces the tax itself, rupee for rupee. A credit of Rs 10,000 means exactly Rs 10,000 less tax — which is why the credits box in our calculator is subtracted straight from the tax.

Where salaried people commonly get credits

• Donations to approved institutions (Section 61): donations to approved non-profit organisations and funds can earn a credit, calculated as a percentage of the donation subject to limits based on your taxable income.
• Pension contributions (Section 63): contributions you make to an approved pension fund can earn a credit, again subject to limits linked to your income and age.
• Tax already withheld elsewhere: withholding tax collected on other transactions during the year (where it is adjustable, not final) is credited against your final liability when you file.

The exact percentages and caps are set out in the Income Tax Ordinance and change from time to time, so this page deliberately does not print rates it cannot keep current. What matters for using the calculator: add up the credits you are entitled to for the year, enter the total in the "Tax credits" box, and the tax falls by that amount — never below zero.

Claim them through payroll, not just at filing time

If you tell your employer about your credits (with proof), Section 149 requires the employer to allow for them when deducting your monthly tax. If you do not, the credit is still yours — but you will claim it as a refund when you file your return, which is slower.

General information only — not tax advice. Whether a specific donation or fund qualifies, and the limits that apply to you, should be confirmed against the Income Tax Ordinance 2001 or with the FBR. Last checked 4 November 2026.