Tax Exemption Application (Pakistan)
Date: [Application Date]
To:
The Commissioner Inland Revenue
[Tax Office]
Federal Board of Revenue, Government of Pakistan
APPLICATION FOR TAX EXEMPTION / EXEMPTION CERTIFICATE
Under the Income Tax Ordinance 2001 | Sales Tax Act 1990 | Customs Act 1969
1. APPLICANT DETAILS
Name: [Applicant Name]
Entity Type: [Applicant Type]
CNIC / NICOP / Reg. No.: [Applicant CNIC]
NTN: [Applicant NTN]
Address: [Applicant Address]
Phone: [Applicant Phone]
Email: [Applicant Email]
2. EXEMPTION REQUESTED
Type of Exemption: [Exemption Type]
Legal Basis / Provision: [Legal Basis]
Exemption Period / Tax Year: [Exemption Period]
Nature of Income / Activity: [Income Source]
Estimated Annual Income (PKR): [Estimated Income]
3. SUPPORTING INFORMATION
Registration / Incorporation Details: [Registration Details]
Prior Exemption Certificate No. (if renewal): [Prior Exemption No]
The following documents are enclosed in support of this application:
(i) Copy of CNIC / NICOP / registration certificate;
(ii) Copy of NTN certificate and FBR Active Taxpayer List confirmation;
(iii) Trust deed / memorandum of association / constitution of organisation (if applicable);
(iv) SECP registration certificate or provincial registration (if applicable);
(v) Latest audited accounts / income and expenditure statement;
(vi) Copy of prior tax exemption certificate (if renewal);
(vii) Any other supporting document prescribed by FBR.
4. GROUNDS FOR EXEMPTION
The applicant respectfully submits that it is entitled to the exemption requested on the following grounds:
(a) The applicant qualifies under [Legal Basis] of the applicable tax statute as its income / activity falls squarely within the scope of the stated exemption provision;
(b) The applicant is a registered [Applicant Type] and operates exclusively for the stated purpose without distribution of profits to members or associates;
(c) The applicant has been in compliance with all FBR filing obligations and its NTN appears on the Active Taxpayer List.
5. DECLARATION
I/We, [Applicant Name], do hereby solemnly declare that the information furnished in this application and attached documents is true and correct to the best of our knowledge. We understand that any false statement or misrepresentation constitutes an offence under Section 182 of the Income Tax Ordinance 2001 and the applicable provisions of other tax statutes, exposing the applicant to prosecution and disqualification from the exemption.
Yours faithfully,
[Applicant Name]
NTN: [Applicant NTN]
Date: [Application Date]
Place: [City]
Official Stamp: _________________________
Applicant / Authorised Signatory
________________
Signature
What Is a Tax Exemption Application (Pakistan)?
A Tax Exemption Application in Pakistan supplies the facts and figures the authority requires so the matter can be processed, assessed or verified.
Section 159 of the Income Tax Ordinance 2001 specifically empowers the Commissioner Inland Revenue to issue a certificate granting exemption from or reduction in the withholding tax deduction that would otherwise be made by a prescribed withholding agent under Chapter X of the Income Tax Ordinance 2001 (Sections 148 to 156B). The Section 159 exemption certificate is the most commonly applied-for tax exemption in Pakistan's commercial sector — companies with thin profit margins, exporters, and service providers whose actual tax liability is lower than the amount being withheld at source apply for these certificates to avoid liquidity strain caused by excess withholding.
The Second Schedule of the Income Tax Ordinance 2001 contains four parts: Part I lists incomes wholly exempt from income tax (including income of approved charitable trusts, income of the Agha Khan Development Network entities, income of listed companies in Special Economic Zones for a prescribed period, and certain agricultural income); Part II lists reductions in tax rates applicable to specific categories; Part III lists reductions in the withholding tax rate; and Part IV lists exemptions from the application of specific sections. Applications for exemptions under the Second Schedule rely on the specific entry in the relevant Part that covers the applicant's situation.
For charitable organisations and non-profit entities seeking income tax exemption, Section 2(36) of the Income Tax Ordinance 2001 defines a non-profit organisation, and Part I of the Second Schedule (Clause 58) grants exemption from income tax to income derived by an approved non-profit organisation from non-commercial activities. Approval is granted by the Commissioner Inland Revenue upon application demonstrating that the organisation meets the criteria — registered as a trust under the Charitable Endowments Act 1890 or the Societies Registration Act 1860, operating exclusively for charitable, educational, religious, or welfare purposes, and not distributing income to members or directors.
For exporters of goods and services, Section 154 of the Income Tax Ordinance 2001 imposes collection of tax at source on export proceeds — exporters with zero-rated supplies under the Sales Tax Act 1990 or those eligible for the final tax regime for exports can apply for reduced-rate certificates under Section 159 of the Income Tax Ordinance 2001 to reduce or eliminate advance tax collection on export proceeds by their scheduled banks.
FBR's Inland Revenue Policy wing has issued numerous SROs over the years granting sector-specific tax exemptions — including exemptions for Information Technology (IT) exports under Section 65F of the Income Tax Ordinance 2001 (effective until 2025, with possible extension), exemptions for Special Economic Zone (SEZ) investors, and reduced rates for specific agricultural and renewable energy sectors. Applicants must reference the specific SRO or Second Schedule entry in their application to demonstrate eligibility.
When Do You Need a Tax Exemption Application (Pakistan)?
A Tax Exemption Application in Pakistan is required when a taxpayer falls within a category eligible for income tax or withholding tax relief but must formally apply to FBR to activate that relief.
A Tax Exemption Application is required when a non-profit organisation, charitable trust, or welfare society seeks approval under Clause 58 of Part I of the Second Schedule of the Income Tax Ordinance 2001 to exempt its income from income tax. Without formal approval by the Commissioner Inland Revenue, the organisation cannot claim the exemption in its income tax return and remains subject to the standard corporate tax rate of 29% (for companies) or the applicable AOP rate. The application must be filed along with the organisation's trust deed, registration certificate, audited accounts, and evidence of charitable activities.
A Tax Exemption Application under Section 159 of the Income Tax Ordinance 2001 is needed when a company, service provider, or contractor is subject to withholding tax deductions by multiple payers at rates that far exceed the actual tax liability for the year, causing a liquidity problem. For example, an IT company with high revenues but thin net margins paying withholding tax at 8% on all service receipts under Section 153 of the Income Tax Ordinance 2001 may apply for a reduced-rate certificate from the Commissioner Inland Revenue to reduce withholding to 3% or 4%, matching the actual effective tax rate.
A Tax Exemption Application is required by exporters of goods and services who wish to reduce the advance tax collected on export proceeds under Section 154 of the Income Tax Ordinance 2001. Exporters eligible for zero-rating under the Export Facilitation Scheme 2021 or those with documented export contracts may apply to the Commissioner Inland Revenue for a reduced advance tax rate or a Section 159 exemption certificate to present to their scheduled banks.
A Tax Exemption Application is needed by companies operating in Special Economic Zones (SEZs) declared under the Special Economic Zones Act 2012, who are entitled to income tax holiday under Part I of the Second Schedule of the Income Tax Ordinance 2001 for the period specified in the SEZ enterprise approval. The company must file a Tax Exemption Application with FBR (referring to the relevant Second Schedule clause and the SEZ approval letter) to receive a formal exemption certificate that it can present to withholding agents.
A Tax Exemption Application is required by hospitals, schools, and universities approved by the relevant regulatory authority — the Pakistan Medical Commission (PMC), the Higher Education Commission (HEC), or provincial school education departments — that claim exemption from income tax under applicable Second Schedule provisions for educational and healthcare institutions operating on a not-for-profit basis in Pakistan.
What to Include in Your Tax Exemption Application (Pakistan)
A valid Tax Exemption Application in Pakistan under Section 53 or Section 159 of the Income Tax Ordinance 2001 must contain the following essential elements to enable the Commissioner Inland Revenue to evaluate and process the application.
Applicant Identity: Full legal name, NTN issued by FBR, NADRA CNIC number (for individuals) or SECP company registration number and company NTN (for companies), registered address, and business activity description. The NTN is mandatory as the Commissioner Inland Revenue's office will use it to retrieve the applicant's filing history on the IRIS portal and verify that all returns are filed and all taxes paid before granting an exemption.
Legal Basis for Exemption: The application must cite the specific provision of the Income Tax Ordinance 2001 or SRO under which the exemption is claimed — for example, Section 159 (exemption from withholding), Part I of the Second Schedule Clause 58 (non-profit income), Part I Clause 133 (SEZ exemption), or a specific SRO number and date. Vague references to "applicable law" or "government policy" are insufficient — the Commissioner Inland Revenue requires a precise legal basis to issue an exemption certificate.
Financial Justification: For Section 159 withholding tax reduction applications, the application must include a financial projection or historical financial analysis demonstrating that the applicant's effective tax rate is lower than the withholding tax rate being applied. This typically involves submitting the last two to three years of audited financial statements prepared by a Chartered Accountant (CA) registered with the Institute of Chartered Accountants of Pakistan (ICAP), the corresponding income tax returns filed on IRIS, and a tax computation showing the effective tax rate. The Commissioner Inland Revenue uses this data to compute the appropriate reduced withholding rate.
Details of Withholding Agents (for Section 159 applications): The application must list the primary withholding agents — companies, government departments, or banks — that deduct or collect tax from the applicant, along with the sections under which deduction is made and the estimated annual deduction amounts. The Section 159 exemption certificate, once issued, is presented to each withholding agent who must then apply the reduced rate or zero rate specified in the certificate.
Supporting Documentation for Charitable / Educational Exemptions: For non-profit organisations, hospitals, schools, and universities, the application must include the trust deed or memorandum and articles of association, registration certificate from the relevant authority (charity registrar, SECP, provincial government), audited accounts for the last two years showing that income is applied exclusively for charitable or educational purposes, and a list of office bearers with their CNICs and confirmation that no individual benefits personally from the organisation's income.
Period of Exemption Requested: The application must state the period for which the exemption is requested — typically one tax year at a time for Section 159 certificates (which are renewed annually). For Second Schedule-based exemptions for charitable organisations or SEZ enterprises, the application may request a permanent exemption subject to annual compliance review.
Declaration by Authorised Representative: The application must be signed by the applicant or an authorised representative (a tax practitioner holding a Power of Attorney under the Income Tax Ordinance 2001, typically a CA registered with ICAP or a tax lawyer enrolled at the relevant High Court Bar). FBR requires that the signatory be identified and their authority to represent the applicant confirmed.
Forms-legal.com provides this Tax Exemption Application (Pakistan) template to assist eligible taxpayers in structuring their application to FBR. The Commissioner Inland Revenue typically takes 30 to 60 days to process exemption applications. Applicants with urgent withholding tax relief needs should apply at the start of the tax year (July) to allow time for processing before significant withholding tax deductions accumulate.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Tax Exemption Application (Pakistan) (Pakistan) [Legal document template]. Forms Legal. https://forms-legal.com/pakistan/government/declarations/tax-exemption-application-pakistan
"Tax Exemption Application (Pakistan) (Pakistan)." Forms Legal, 2026, https://forms-legal.com/pakistan/government/declarations/tax-exemption-application-pakistan.
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author = {{Forms Legal}},
title = {Tax Exemption Application (Pakistan) (Pakistan)},
year = {2026},
howpublished = {\url{https://forms-legal.com/pakistan/government/declarations/tax-exemption-application-pakistan}},
note = {Free legal document template}
}Also available for these jurisdictions:
Frequently Asked Questions
A tax exemption in Pakistan under the Income Tax Ordinance 2001 means that a specified income or entity is wholly removed from the charge of income tax — the income is not included in taxable income and no tax is payable on it. For example, income of an approved non-profit organisation under Clause 58 of Part I of the Second Schedule of the Income Tax Ordinance 2001 is fully exempt — the organisation does not include such income in its income tax return and pays no tax on it. A tax credit, by contrast, is a deduction from the tax payable computed on total taxable income — the income is first included in taxable income, the tax is computed at normal rates, and then the credit is deducted from the tax payable. For example, the investment tax credit under Section 65B of the Income Tax Ordinance 2001 allows a 10% credit against tax for investments in new plant and machinery. A withholding tax deduction is a collection mechanism — it is not itself an exemption or a credit, but the amount deducted is credited against the final tax liability under Section 168 of the Income Tax Ordinance 2001. Section 159 exemption certificates reduce the withholding rate rather than creating a tax exemption from the underlying income — the income remains taxable in the annual return, but the advance collection is reduced or eliminated to match the actual tax liability.
A Section 159 exemption certificate issued by the Commissioner Inland Revenue under Section 159 of the Income Tax Ordinance 2001 is typically valid for one tax year — from 1 July to 30 June — or for the period specified in the certificate, whichever is shorter. Some Commissioners issue certificates for six months only if the applicant's financial data does not support a full-year projection, or if the applicant has outstanding returns or liabilities that the Commissioner wishes to monitor. Applicants should apply for renewal of the Section 159 certificate at the start of each tax year — ideally in July — to avoid gaps during which withholding agents revert to the standard rate. Most Regional Tax Offices (RTOs) and Large Taxpayer Offices (LTOs) process renewal applications faster than initial applications, as the applicant's track record is already on the IRIS system. The withholding agent is not protected from liability if it applies a reduced rate based on an expired certificate — if the certificate has expired and the withholding agent fails to deduct at the standard rate, the withholding agent becomes liable under Section 161 of the Income Tax Ordinance 2001 for the unpaid withholding tax. Applicants should therefore ensure that they obtain fresh certificates promptly at the start of each tax year and provide copies to all relevant withholding agents.
A foreign company — whether a branch, a subsidiary, or a permanent establishment — operating in Pakistan is a non-resident person for income tax purposes under Section 80 of the Income Tax Ordinance 2001 unless it qualifies as a resident company under Section 83. Foreign companies are taxable in Pakistan on Pakistan-source income under Section 11 of the Income Tax Ordinance 2001. A foreign company may apply for tax exemption or reduced withholding tax rates under the relevant Double Taxation Agreement (DTA) between Pakistan and the country where the foreign company is resident. Pakistan has signed Double Taxation Avoidance Agreements with over 60 countries, including the USA, UK, China, Saudi Arabia, UAE, Germany, France, Malaysia, and Indonesia. Under these DTAs, the withholding tax rate on dividends, interest, royalties, and technical services fees paid by Pakistani companies to foreign recipients may be reduced below the standard Income Tax Ordinance 2001 rates. To claim DTA benefit, the foreign company must apply to the Commissioner Inland Revenue with a tax residency certificate from its home country's tax authority, confirming that it is a tax resident of the DTA partner country. Additionally, companies investing in Pakistan through Special Economic Zones (SEZs) under the Special Economic Zones Act 2012 may claim income tax holiday under Part I of the Second Schedule of the Income Tax Ordinance 2001 upon application to FBR.
If the Commissioner Inland Revenue rejects a Tax Exemption Application filed under Section 159 or Section 53 of the Income Tax Ordinance 2001, the applicant has several options. First, the applicant may request a personal hearing before the Commissioner Inland Revenue to address any deficiencies in the application — Rule 209 of the Income Tax Rules 2002 provides for hearings in exemption and certificate matters. Second, the applicant may supplement the application with additional financial evidence — updated audited accounts, revised tax computations, or additional documentation of charitable activities — and resubmit. Third, if the rejection is based on an incorrect interpretation of the Income Tax Ordinance 2001 or the Second Schedule, the applicant may file a constitutional petition before the relevant High Court (Lahore High Court, Sindh High Court, Islamabad High Court, Peshawar High Court, or Balochistan High Court) challenging the Commissioner's decision — High Courts have jurisdiction to issue writs in tax matters under Article 199 of the Constitution of Pakistan. In the interim, while the exemption application is pending or under challenge, the applicant will continue to be subject to withholding at the standard rate and should claim refund of the excess withheld tax in the annual income tax return under Section 170 of the Income Tax Ordinance 2001. Consulting a tax practitioner registered with ICAP or a tax lawyer enrolled at a High Court Bar is advisable before pursuing the legal challenge route.
No. NGOs and charitable organisations in Pakistan are not automatically exempt from income tax simply by virtue of being registered as charities, trusts, or welfare societies. Exemption from income tax under Clause 58 of Part I of the Second Schedule of the Income Tax Ordinance 2001 requires formal approval by the Commissioner Inland Revenue of the relevant RTO. To obtain approval, the organisation must demonstrate: registration as a non-profit entity under the Charitable Endowments Act 1890, the Societies Registration Act 1860, the Companies Act 2017 (Section 42 — non-profit company), or provincial charity registration laws; constitution or trust deed restricting the use of income exclusively to charitable, educational, religious, or welfare purposes within Pakistan; audited accounts showing no distribution of income to members or office bearers; and NTN registration with FBR. Once approval is granted, the organisation must file annual income tax returns under Section 114 of the Income Tax Ordinance 2001 declaring its income and claiming the exemption — failure to file returns causes the organisation to lose the exemption benefit and become liable at standard rates. The Commissioner Inland Revenue may withdraw approval if the organisation's activities change or if it is found to be distributing benefits to individuals. Donations received by approved non-profit organisations also qualify as deductible for the donors under Section 61 of the Income Tax Ordinance 2001, subject to conditions.
The process for obtaining a Section 159 exemption certificate from FBR's Commissioner Inland Revenue involves the following steps. First, prepare the application and supporting documents — the application must cite Section 159 of the Income Tax Ordinance 2001 as the legal basis, provide the applicant's NTN and CNIC/company registration number, specify the withholding agents from whom reduced deduction is sought, state the current withholding rate being applied, and provide financial evidence justifying the reduced rate (typically the last two years of audited accounts and filed income tax returns). Second, submit the application to the Commissioner Inland Revenue of the RTO or LTO where the applicant's NTN is registered — submission is typically in hard copy at the RTO's facilitation counter, though some RTOs now accept online submissions through the IRIS portal or by email. Third, the Commissioner Inland Revenue reviews the application — during review, the Commissioner may request additional documents, call the applicant for a hearing, or issue a deficiency notice. Fourth, if satisfied, the Commissioner issues the Section 159 exemption certificate specifying the reduced withholding rate (or nil rate), the period of validity, and the list of withholding agents to whom it applies. Fifth, the applicant presents original certified copies of the certificate to each withholding agent.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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