{"id":222,"date":"2026-09-21T10:31:32","date_gmt":"2026-09-21T10:31:32","guid":{"rendered":"https:\/\/xactlegal.com\/blogs\/?p=222"},"modified":"2026-09-21T10:31:33","modified_gmt":"2026-09-21T10:31:33","slug":"fbr-investment-tax-credit-for-tax-year-2027-what-companies-need-to-know","status":"publish","type":"post","link":"https:\/\/xactlegal.com\/blogs\/2026\/09\/21\/fbr-investment-tax-credit-for-tax-year-2027-what-companies-need-to-know\/","title":{"rendered":"FBR Investment Tax Credit for Tax Year 2027: What Companies Need to Know"},"content":{"rendered":"\n

The Federal Board of Revenue (FBR)<\/a> has clarified the investment tax credit available to companies under Section 65B of the Income Tax Ordinance, 2001<\/strong> for Tax Year 2027. While the provision provides a 10% tax credit<\/strong> on certain qualifying investments, it does not create a new tax credit for investments made during 2026 or Tax Year 2027.<\/p>\n\n\n\n

What Is the Investment Tax Credit?<\/h2>\n\n\n\n

Under Section 65B, a qualifying company may claim a tax credit equal to 10% of the amount invested<\/strong> in eligible plant and machinery used for the extension, expansion, balancing, modernisation, or replacement of existing plant and machinery in an industrial undertaking established in Pakistan.<\/p>\n\n\n\n

For example, an eligible investment of Rs. 100 million<\/strong> could result in a tax credit of Rs. 10 million<\/strong>, subject to the applicable legal conditions.<\/p>\n\n\n\n

Important: Historical Investment Period<\/h2>\n\n\n\n

The main 10% credit under Section 65B applies to qualifying investments where the plant and machinery was purchased and installed between July 1, 2010 and June 30, 2019<\/strong>.<\/p>\n\n\n\n

Therefore, companies should not interpret Section 65B as providing a new 10% investment tax credit for plant and machinery purchased and installed during Tax Year 2027.<\/p>\n\n\n\n

Special 20% Tax Credit<\/h2>\n\n\n\n

Section 65B also contains a separate provision for certain companies established in Pakistan before July 1, 2011.<\/p>\n\n\n\n

Where qualifying companies invested through 100% new equity<\/strong> between July 1, 2011 and June 30, 2016 for balancing, modernisation, or replacement of existing plant and machinery, the applicable tax credit was 20% of the investment<\/strong>, subject to the statutory requirements.<\/p>\n\n\n\n

Carry-Forward of Unused Credit<\/h2>\n\n\n\n

Where the available tax credit exceeded the tax payable in the relevant year, the unused amount could be carried forward, subject to the applicable limits.<\/p>\n\n\n\n

For investments covered under Section 65B(1), the unused credit could generally be carried forward for up to two subsequent tax years<\/strong>, while certain investments under Section 65B(4) could qualify for a longer carry-forward period.<\/p>\n\n\n\n

What Companies Should Check<\/h2>\n\n\n\n

Companies reviewing investment tax credits for Tax Year 2027<\/strong> should verify:<\/p>\n\n\n\n