Individual - Deductions

Last reviewed - 01 January 2021

Employment expenses

Significant reductions available against salary income are as follows:

  • Medical allowance/expenses: Reimbursement of expenses on medical treatment or hospitalisation or both received by an employee is exempt from tax.
  • Medical allowance of up to 10% of basic salary is exempt if the facility of reimbursement of medical expenses is not available to the employee.
  • Any special allowance (other than entertainment/conveyance allowance) received in connection with performance of employment duties.

Personal deductions/credits

  • Special straight deduction is available for Zakat paid under the Zakat and Usher Ordinance.
  • A rebate at the average rate of tax is allowed on donations made to any approved non-profit organisation on the lower of donation value and 30% of the individual’s taxable income. In case of donations made by an individual to an associate, the amount of donations qualifying for tax credit would be restricted to 15% of the individual’s taxable income.
  • Individuals are also allowed a straight deduction against taxable income in case of donations made to certain approved institutions. However, in case of donations made to an associate, the said deduction is restricted to 15% of the individual’s taxable income for the year.
  • Special deductions/tax credits are available for interest paid on house loans, investments in specified shares/payment of insurance premium, etc.