Karachi, February 5, 2025 – In a significant move aimed at easing the financial burden on retirees, Pakistan’s pensioners have availed income tax exemptions worth a total of Rs 43.61 billion in the past year, according to the Federal Board of Revenue (FBR). This relief has been granted under various clauses of the Income Tax Ordinance, 2001, and forms part of the government’s ongoing efforts to provide fiscal support to retired individuals.
The FBR’s latest annual report for 2024 highlights the substantial tax breaks provided to pensioners, emphasizing the role of these exemptions in ensuring economic security for retirees. These measures are intended to safeguard pensioners, a particularly vulnerable segment of society, by reducing their financial strain post-retirement.
The report details the breakdown of tax exemptions, which include specific provisions outlined in the Second Schedule of the Income Tax Ordinance, 2001. Under these provisions, pensioners in Pakistan have been granted various forms of relief based on their service history and employment status. One of the most notable exemptions was Rs 2.39 billion, granted under Clause 8 of the Second Schedule. This clause stipulates that any pension received by a Pakistani citizen from a former employer is exempt from tax, provided the individual is not currently employed by the same organization or its associates. If a pensioner receives multiple pensions, the exemption applies to the higher amount. This clause alone has provided substantial relief to retirees who depend on pensions as their primary source of income.
In addition, pensioners who have served in the Armed Forces of Pakistan, the Federal Government, or Provincial Governments benefitted from a total exemption amounting to Rs 23.32 billion. This exemption, granted under Clause 9 of the Income Tax Ordinance, also extends to the families and dependents of public servants and military personnel who have passed away during their service. This provision ensures that the families of deceased service members continue to receive financial support without the burden of taxes.
The third significant tax relief, amounting to Rs 17.90 billion, came from Clause 12 of the Second Schedule. This clause covers the tax exemption on commutation of pension payments received either from the government or under any pension scheme approved by the FBR. The exemptions granted under this clause help ease the financial burden of retirees who choose to receive a lump sum payout in lieu of periodic pension payments.
The tax exemptions have had a substantial impact on the financial stability of pensioners across Pakistan. By reducing the tax burden on retirees, these exemptions allow them to retain a larger portion of their pension income, which is often their only source of financial support after retirement. The FBR’s efforts to provide these exemptions are particularly crucial for pensioners who are not able to rely on additional sources of income.
These exemptions are also a reflection of the government’s commitment to the financial well-being of retired individuals. By prioritizing their needs, the government seeks to ensure that pensioners, especially those who served in the military or public services, are not left financially vulnerable during their post-retirement years. Moving forward, the FBR has indicated its intention to continue offering these exemptions and to enhance the transparency and efficiency of the process. The report emphasizes that the FBR will maintain its commitment to ensuring pensioners receive their entitled benefits without unnecessary complications. The government also aims to update and improve tax relief policies in the future to better serve the needs of this demographic.
Overall, the significant tax exemptions granted in 2024 underscore the importance of providing financial security to pensioners and the role of the government in supporting this crucial section of society. By offering these relief measures, the FBR is helping to create a more secure financial environment for retirees across Pakistan. The tax exemptions provided to pensioners, totaling Rs 43.61 billion, are a testament to the government’s efforts to protect and support retired individuals, particularly those reliant on pension income. These exemptions play a crucial role in alleviating financial stress and ensuring that pensioners enjoy a stable and secure post-retirement life. The continued commitment of the FBR in this area highlights the importance of financial security for the elderly and those who have contributed significantly to the country’s development through public service or military duty.