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ISLAMABAD: The deferred tax payments are not made part of the tax expenditures as it is not possible to verify whether the deferred tax was actually collected at a later stage.

According to the Tax Expenditure Report-2025 issued by the Federal Board of Revenue (FBR), certain provisions in the Income Tax Ordinance (ITO), 2001 — referred to as procedural clauses — offer exemptions from withholding tax requirements for specific categories of taxpayers or transactions. These exemptions are typically granted in cases where an alternative mechanism already exists within the tax structure to ensure that the tax liability is ultimately fulfilled.

Tax Expenditure Report 2025: Major beneficiary sectors of tax relief listed

An illustrative example is found in Clause 36A of Part IV of the Second Schedule to the ITO, 2001, which exempts withholding tax on profit received from the Behbood Savings Certificates issued by the National Savings Center. This provision, intended to facilitate senior citizens, does not result in a loss of tax revenue because the tax on this income is still payable at the time of filing the income tax return.

Copyright Business Recorder, 2025

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