25% Tax rebate for university teachers to be restored

ISLAMABAD: In a major development for Pakistan’s academic community, the federal government has decided to restore 25pc income tax rebate for faculty members and researchers of all universities.

Following the directions of Prime Minister Muhammad Shehbaz Sharif, the Federal Board of Revenue (FBR) has prepared and secured approval for a summary to restore the tax rebate. The prime minister signed the summary and forwarded it to the Ministry of Law and Justice. Instructions have been issued to draft an Act of Parliament or ordinance to formalise the decision. The move will address a long-pending demand of hundreds of universities and research institutions. According to a senior FBR official, Zafar Sultan, the next National Assembly session is set for May 5, 2025. During the session, it will be laid as a bill to amend the Income Tax Ordinance 2001. There are strong indications that the ordinance or Act will be applied retrospectively. This means any amount deducted from teachers’ and researchers’ salaries will either be refunded or adjusted against future salaries. Earlier, until 2022, Pakistan had incentivised its educators and researchers by offering them a 25pc tax rebate. However, this benefit was withdrawn, and the universities and research institutions were instructed to apply full tax deductions starting from 2024-25. Following negotiations between the Government of Pakistan and the All Government Employees Grand Alliance, it was agreed that the controversial order would be withdrawn and the rebate would be restored. Earlier, on April 21, 2025, the Federal Tax Ombudsman also directed the FBR to withdraw all field office letters that led to tax deductions.