One more reason to choose Mutual Funds : Tax Rebate

Hello.

We have discussed in blog earlier the benefits one can reap from investing in mutual funds.Out of those benefits we are now going to discuss about Tax rebate or Tax relief which you can claim if you have invested in mutual funds.

Tax rebate is one the benefits which not only increase your ROI (return on investment) but also saves your tax which you file annually . As per section 62 of the Income Tax Ordinance of Pakistan, 2001 you can claim  tax rebate of up to Rs. 60,000/- in case of salaried person or up to Rs 75,000/- in case of non salaried person on investments up to Rs. 300,000/-. Section 62 of Income Tax Ordinance, 2001 ‘Investment in Shares’ provides an incentive of tax credit to individual investors in a tax year in respect of investment in new shares offered to the public by a public company listed on a stock exchange in Pakistan. This tax credit can be obtained by purchasing units of open end funds which are listed in stock exchange provided a person holds its investment for a minimum period of 12 months.  The employer can make the adjustment of tax credit at the time of payment of salary (Section 149).

 

To calculate Tax Rebate you can follow these steps: 

• Determine the maximum amount on which tax credit can be claimed. This amount is lesser of:

1. The total cost of acquiring the units;
2. 10% of the person’s taxable income for the financial year; or
3. Rupees three hundred thousand Rs. 300,000/-

• To calculate the average tax rate. Its formula is: 

	Amount of tax payable without Tax Credit
	Taxable Income

 

• Tax Credit/rebate is calculated as:

           Tax credit = Average Tax Rate  x  Maximum Amount for Tax Credit