Islamic Fund Management
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Table 4.13: Pakistan Government’s Tax Incentives for Investing in Funds
Type of Fund Tax Incentive(s)
Mutual Fund  Capital Gains Tax (CGT) on redemption of units of mutual funds as stated in
Division VII, Part I of 1st Schedule of the Income Tax Ordinance 2001 is
calculated based on the following rates:
Income Tax Rates:
(Where securities were acquired before 1 July 2016)
Holding Period Tax Rates
Filer Non-Filer
Less than 12 months 15% 18%*
12-24 months 12.5% 16%
24 months or more but the security
was acquired on or after July 1, 2013
7.5% 11%
Security acquired before July 1,
2013
0% 0%
*If security is acquired after July 1, 2016, the tax rate for non-filer will be 20%.
Withholding Tax Rates:
Category Rates
Individual and AoPs 10% for stock funds
10% for other funds
Company 10% for stock funds
25% for other funds
- Provided further that in case of a stock fund if dividend receipts of the fund are
less than capital gains, the rate of tax deduction shall be 12.5%
- Provided further that no capital gains tax shall be deducted, if the holding period
of the security is more than 4 years
 Corporate  Tax savings of 25%-35% compared to bank deposits.
 Individual  Tax savings of up to 20% compared to bank deposits.
 Tax credit/relief on investment amount of up to PKR1.5 million or 20% of
taxable income (whichever is lower) in open-ended funds if the investment is
held for 2 years.
Pension Fund
(Voluntary Pension
Scheme)
 Tax credit on the actual contribution to a pension fund, 20% of taxable income.
 For participants joining the VPS at 41 years old and above, an additional tax
credit of 2% is allowed. The maximum tax credit allowed is 30% of the annual
tax credit.
 Additional tax credit is allowed until 30 June 2019.
REIT  REITs distributing 90% of their income as dividends are exempted from
payment of income tax at the REIT level.
Sources: Income Tax Ordinance (2001), JamaPunji (a)