The Federal Board of Revenue (FBR) has revised the income tax exemption certificate rules for Tax Year 2027, introducing new eligibility requirements for specified taxpayers and approved not-for-profit organisations.
The changes were introduced through amendments to Section 159 of the Income Tax Ordinance, 2001, following the Finance Act, 2026.
90% Income Distribution Requirement
Under the new rules, eligible persons must have distributed 90% or more of their accounting income during the immediately preceding tax year in accordance with the applicable provisions of the Income Tax Ordinance.
Meeting this requirement will allow qualifying taxpayers to obtain an exemption certificate for the subsequent tax year.
New Businesses Can Apply Through an Undertaking
Businesses starting operations for the first time may not have a previous tax year or distribution record.
In such cases, the exemption certificate can be issued based on an undertaking submitted to the Commissioner, committing the taxpayer to distribute at least 90% of the required accounting income during the relevant tax year.
Exemption Certificates for Not-for-Profit Organisations
The revised rules also cover approved not-for-profit organisations under Section 2(36)(c) of the Income Tax Ordinance.
An organisation granted the required approval for a tax year can qualify for an exemption certificate under Section 159(1) for the entire tax year.
What This Means for Taxpayers
The revised framework provides clearer eligibility criteria for exemption certificates while linking them to income-distribution requirements and formal approval status.
Taxpayers and eligible organisations should review their compliance records and ensure that the relevant requirements are fulfilled when applying for exemption certificates for Tax Year 2027.
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