Reduce Your Taxes
How do tax credits Work?
Avail tax credit on investment in both mutual fund and pension schemes and enhance the overall return on your savings.
A tax credit is a kind of tax saving that you can get on your income tax for the year if you invest in mutual fund schemes, investment plans or pension schemes.
This tax savings facility can be availed by both salaried and self-employed individuals in accordance with the Income Tax Ordinance, 2001.
The amount of tax credit that you will be entitled to will be adjusted from your payable annual income tax for the year thus giving you an overall tax saving.
Is there any condition on getting a tax credit?
The only condition is that you need to hold your investment for a period of at least two years (as per the Income Tax Ordinance), applicable on investments in a mutual fund scheme or investment plan.
In case of investment in a pension scheme, you need to hold your investment for at least one year to be eligible to claim a tax credit. However, if you withdraw any amount from your investment in a pension scheme before your preselected retirement date then a tax penalty will be charged which will be equivalent to your average tax rate of last 3 years.
How much tax credit can I get?
The amount of tax credit you can avail is dependent on your income tax rate and the amount you wish to invest. You may visit the tax calculator at the link below to calculate how much tax rebate you can avail.
How can I claim my tax credit amount?
In order to claim your tax credit amount you can do the following:
If you are a salaried individual, you can inform your Human Resources (HR) or Finance Department about your investments and ask them to adjust your tax credit amount from the monthly income tax deductions made from your salary
If you are a self-employed individual or a salaried individual filing your own personal income tax returns, you can adjust your tax payable and enclose a copy of your statement of investment along with your documents when you file your returns
Disclaimer: *To avail Tax Rebate on mutual funds, a minimum investment holding period of two years from the date of investment is required. As per Section 62 of Income Tax Ordinance, 2001, an individual investor of open end mutual fund (unit trust schemes) can claim tax credit on investment up to Rs. 2,000,000/- or 20% of individual’s taxable income (whichever is lower) on an investment made in Mutual Funds between July 1st and June 30th.**As per Section 63 of Income Tax Ordinance, 2001, an eligible person joining pension scheme at any age shall be allowed 20% Tax Rebate per annum for each year. Withdrawal from pension fund before retirement shall have tax implications. Pre-mature withdrawal from Pension funds is subject to tax. Lump sum withdrawal in excess of 50% at or after retirement age will be subject to tax. All investments in mutual funds and pension funds are subject to market risks. Past performance is not necessarily indicative of the future results. Please read the Offering Document to understand the investment policies and the risks involved.
Note: Consult your tax advisor for more information. The benefits shown in the table are calculated based on Maximum Investments Subject to respective income brackets as defined in Finance Act 2019
1 As per Section 62 and 63 of ITO 2001. Maximum tax rebate on Mutual Funds 20% and Maximum tax rebate on pension funds 20% for any individual.