Salary & Income · Sections 60–60D and 63 · Tax Year 2026-2027
Tax Credits & Deductible Allowances Calculator
Zakat, Workers’ Welfare Fund, Workers’ Participation Fund and tuition fee come off your taxable income. A pension fund contribution comes off the tax instead, at your average rate. The two are worth different amounts, and this shows both.
Tuition fee — Section 60D
Breakdown
What each relief is worth
| Relief | Provision | Amount paid | Allowed | What limits it |
|---|
The first four come off taxable income; the pension fund line is a credit against the tax, shown here as the rupee credit it produces. None of the allowances can be refunded, carried forward or carried back.
Step by step
How the two kinds of relief differ
Allowances come off income
Zakat, WWF and WPPF in full; tuition fee subject to three caps. Worth your marginal rate.
Then the slabs run
Tax is worked out on the reduced income, using the schedule for your income type.
The credit comes off the tax
Section 63 gives (A/B) x C — your average rate on the eligible contribution.
Compare the total
The saving tile shows what all of it is worth against claiming nothing.
Reading the result
Allowances and credits work at different points
They are claimed on the same return and are often discussed together, but they do not do the same job. A deductible allowance reduces the income the slabs are applied to. A credit reduces the tax those slabs produced.
The order matters: allowances first, then the slabs, then credits. Adding them together as though they were one relief overstates the benefit, and for taxpayers near a band boundary it also misses that an allowance can pull income back below the boundary entirely.
Most of this is only available if you file
None of these reliefs is applied by your employer. They are claimed by the taxpayer in the return, which means a salaried person who has tax deducted at source and never files is paying without claiming anything they were entitled to.
Keep the evidence as you go
Zakat deduction certificates, tuition fee receipts, pension fund contribution statements — each relief needs its own proof, and collecting them in September for a year that ended in June is harder than filing them as they arrive.
Where this stops
Reliefs are amended and withdrawn by Finance Act, and eligibility conditions change with them. Check that each one still applies to the tax year you are filing, rather than to the year an article about it was written.
FAQs
Credits and allowances FAQs
Is Zakat deductible from my taxable income?
Yes. Section 60 gives a deductible allowance for the full amount of Zakat paid in the year under the Zakat and Ushr Ordinance 1980, with no cap. It comes off your taxable income, so it is worth your marginal rate — at 29% a Rs 100,000 payment saves Rs 29,000. It cannot be refunded, carried forward or carried back, so an allowance you cannot use in the year is simply lost. Zakat already taken into account under Section 40(2) does not qualify twice.
Can I deduct my children's school fees?
Only in a narrow band, and the caps bite hard. Section 60D applies only if your taxable income is under Rs 1,500,000, and the allowance is the least of three figures: 5% of the tuition fee paid, 25% of your taxable income, and Rs 60,000 multiplied by the number of children. In practice the 5%-of-fee cap usually governs, so a Rs 500,000 fee gives a Rs 25,000 allowance, not Rs 500,000.
What replaced the Section 62 investment credit?
Section 63, which was never withdrawn. It gives a tax credit for contributions to an approved pension fund under the Voluntary Pension System Rules 2005, available to an eligible person with salary or business income. Where Section 62 covered shares, sukuk and life insurance premiums until the Finance Act 2022 removed it, Section 63 covers pension-fund contributions and still stands.
How much is the pension fund credit worth?
The credit is (A / B) x C: A is your tax before credits, B is your taxable income and C is the lesser of what you contributed and 20% of your taxable income. That works out as your average rate applied to the eligible contribution — not your marginal rate, and not the contribution itself. On Rs 3,000,000 of salary a Rs 600,000 contribution produces a credit of about Rs 55,200.
Does the extra allowance for joining after 40 still apply?
No. The proviso allowing an additional 2% of contribution for each year of age above forty expired on 30 June 2019, so this calculator does not apply it. The plain 20%-of-taxable-income ceiling is what governs now.
What is the difference between an allowance and a credit?
An allowance reduces the income the slabs are applied to, so it saves tax at your marginal rate — the rate on your top slice. A credit reduces the tax itself but is computed at your average rate under the (A / B) x C formula. For the same rupee amount an allowance is usually worth more to a higher earner, which is why the two are shown separately here.
Can I claim Workers' Welfare Fund and Workers' Participation Fund?
Yes, in full, under Sections 60A and 60B respectively — including amounts paid under a provincial Workers' Welfare Fund or Workers' Profit Participation Fund law enacted after the 18th Amendment. The exception is an amount paid to a province by a trans-provincial establishment, which is excluded.
Do unused allowances carry forward?
No. Sections 60, 60A, 60B and 60D all say an allowance that cannot be deducted in the year is not refunded, not carried forward and not carried back. There is no relief for a loss year.
Related tools
Donations get their own credit
Section 61 uses the same (A/B) x C formula, with its own 30% and 20% ceilings.
Open Donation Tax Credit Calculator