Deductible Allowances in Pakistan: Sections 60, 60A, 60B and 60D Explained

Full Article

Last reviewed: 30 August 2026 | Law checked through: Income Tax Ordinance, 2001, amended up to 30 June 2026

Deductible allowances can reduce taxable income when their legal conditions are satisfied. This guide explains the current Part IX allowances for Zakat, Workers' Welfare Fund, Workers' Participation Fund and education expenses in practical language.

Contents

1. What is a deductible allowance?
2. Section 60 — Zakat
3. Section 60A — Workers' Welfare Fund
4. Section 60B — Workers' Participation Fund
5. Section 60D — Education expenses
6. Calculation examples
7. Documents and common mistakes
8. Frequently asked questions

What Is a Deductible Allowance?

Section 9 defines taxable income as total income under section 10(a), reduced—but not below zero—by deductible allowances under Part IX. A valid allowance therefore reduces the income base before the applicable tax calculation.

Taxable Income = Total Income − Qualifying Deductible Allowances

A deductible allowance is different from a tax credit, an admissible business expense and withholding tax. A business expense is normally considered while computing income from business. A tax credit generally reduces tax under its own formula. Withholding tax may be adjustable, minimum or final depending on the relevant provision.

Section 60 — Deductible Allowance for Zakat

A person is entitled to a deductible allowance for Zakat paid during the tax year under the Zakat and Ushr Ordinance, 1980. The allowance does not apply where the same Zakat has already been taken into account under section 40(2).

If the Section 60 allowance cannot be deducted under Section 9 for the year, the unused amount is not refundable and cannot be carried forward or carried back. This makes accurate year-specific documentation important.

Useful Evidence

• Bank statement showing compulsory Zakat deduction;
• Zakat deduction certificate;
• Payment receipt or other evidence connected with the qualifying payment; and
• Working paper showing that the amount was not claimed twice.

Section 60A — Workers' Welfare Fund

Section 60A permits a deductible allowance for an amount of Workers' Welfare Fund paid by a person in the tax year under the Workers' Welfare Fund Ordinance, 1971 or an applicable provincial WWF law enacted after the Eighteenth Constitutional Amendment.

The current provision includes a restriction concerning amounts paid to provinces by a trans-provincial establishment. Businesses operating across provinces should obtain advice on jurisdiction, liability and deductibility rather than relying only on accounting classification.

Useful Evidence

• WWF computation for the relevant year;
• Payment challan or official receipt;
• Assessment, return or working under the applicable federal or provincial law; and
• Reconciliation with the financial statements and tax return.

Section 60B — Workers' Participation Fund

Section 60B provides a deductible allowance for Workers' Participation Fund paid in a tax year in accordance with the Companies Profits (Workers' Participation) Act, 1968 or an applicable provincial law relating to the Workers' Profit Participation Fund.

The provision also contains a restriction for an amount paid to a province by a trans-provincial establishment. The correct treatment depends on the governing law, the establishment's operations and the payment evidence.

Useful Evidence

• Fund computation and employee-participation working;
• Payment challan, receipt or fund statement;
• Relevant corporate and payroll records; and
• Tax-return reconciliation.

Section 60D — Deductible Allowance for Education Expenses

Section 60D allows an individual a deductible allowance for tuition fee paid for the individual's children where the individual's taxable income is less than Rs. 1.5 million.

Maximum Allowable Amount

The allowance for the tax year cannot exceed the lowest of the following amounts:

1. 5% of the total tuition fee paid during the year;
2. 25% of the individual's taxable income for the year; or
3. Rs. 60,000 multiplied by the number of children.

The lowest figure—not the highest—is the maximum allowable deduction.

Additional Conditions

• The claimant must be an individual;
• The payment must relate to tuition fee for the individual's children;
• The taxable-income threshold must be satisfied;
• The allowance may be claimed by either parent who made the payment, subject to the provision;
• The NTN or name of the educational institution must be furnished as required;
• An unused amount cannot be carried forward to a later tax year; and
• The allowance is not considered in computing salary tax deduction under section 149.

What Expenses Are Covered?

The statutory wording refers to tuition fee. Admission charges, transport, uniforms, books, hostel charges and other payments should not automatically be treated as tuition fee. The invoice and institution's classification should be reviewed.

Documents to Retain

• Fee challans and paid receipts;
• Bank or digital-payment evidence;
• Child's name and relationship evidence;
• Educational institution's name and NTN, where available;
• Institution certificate where clarification is required; and
• A worksheet comparing all three statutory limits.

Education Allowance Calculation Examples

Example 1: One Child

An eligible individual has taxable income of Rs. 1,200,000 and pays Rs. 300,000 tuition fee for one child.

• 5% of tuition fee = Rs. 15,000
• 25% of taxable income = Rs. 300,000
• Rs. 60,000 × 1 child = Rs. 60,000

Maximum allowance: Rs. 15,000, because it is the lowest amount.

Example 2: Three Children

An eligible individual has taxable income of Rs. 1,400,000 and pays Rs. 1,000,000 tuition fee for three children.

• 5% of tuition fee = Rs. 50,000
• 25% of taxable income = Rs. 350,000
• Rs. 60,000 × 3 children = Rs. 180,000

Maximum allowance: Rs. 50,000.

Example 3: Income Threshold Not Met

If an individual's taxable income is Rs. 1,500,000 or more, the wording “less than one and a half million rupees” is not satisfied. Based on this condition, the Section 60D allowance is not available.

These examples are simplified and assume all other legal requirements are met.

Common Mistakes to Avoid

• Claiming the highest of the three Section 60D limits instead of the lowest;
• Using gross income rather than the relevant taxable-income figure;
• Claiming non-tuition charges without checking the statutory wording;
• Claiming the same tuition payment through both parents;
• Ignoring the “less than Rs. 1.5 million” threshold;
• Trying to carry forward an unused allowance;
• Claiming Section 60C even though it was omitted by the Finance Act, 2022;
• Claiming WWF or WPPF on an accounting provision without qualifying payment; and
• Failing to retain receipts, challans and calculation workings.

Frequently Asked Questions

Do deductible allowances reduce taxable income or tax payable?

They reduce the income base under Section 9. A tax credit, by contrast, generally operates in the calculation of tax payable under its own provision.

Can unused Zakat allowance be carried forward?

No. Section 60 states that an amount not deductible for the year is not refunded, carried forward or carried back.

Who can claim education expenses under Section 60D?

An eligible individual who pays tuition fee for the individual's children and has taxable income below Rs. 1.5 million, subject to all statutory conditions.

How is the education allowance calculated?

It is limited to the lowest of 5% of tuition fee paid, 25% of taxable income, or Rs. 60,000 multiplied by the number of children.

Can both parents claim the same tuition fee?

The allowance is available against the liability of either parent making the payment. The same payment should not be claimed twice.

Is Section 60C still available?

No. Section 60C was omitted by the Finance Act, 2022. Older forms, articles or screenshots may contain outdated references.

Is a provision for WWF or WPPF enough?

The current wording refers to an amount paid in the tax year under the applicable law. The payment and its legal basis should be documented.

Need Help Claiming the Correct Allowances?

AM Tax & Corporate Hub can review your eligibility, supporting records, return filing, wealth statement and FBR/IRIS compliance.

WhatsApp: 0327 0444011
Website: www.amtaxhub.com
Email: amtaxhub@gmail.com

Official Reference

• FBR — Income Tax Ordinance, 2001, amended up to 30 June 2026

Disclaimer: This article provides general educational information and is not legal or tax advice. Eligibility depends on the relevant tax year, payment evidence, governing federal or provincial law and individual facts. Obtain professional advice before filing or claiming an allowance.

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