A new bill, the Income Tax (Second Amendment) Act 2025, seeks to amend the existing Income Tax Ordinance of 2001. The central aim of this amendment is the reinstatement of a significant tax rebate for full-time teachers and researchers employed in recognized educational and research institutions.
Core Changes and Provisions:
The amendment introduces a new clause (3A) into Part III of the Second Schedule of the Income Tax Ordinance, 2001. This clause outlines a reduction in the payable tax for eligible individuals. Specifically, full-time teachers or researchers working in non-profit educational or research institutions that are duly recognized by the Higher Education Commission, a Board of Education, or a University recognized by the Higher Education Commission, including government research institutions, will see their tax liability reduced by 25% of the tax payable on their salary income.
However, the bill includes an important exclusion. Teachers within the medical profession who earn income from private medical practice or receive a share of considerations from patients will not be eligible for this tax rebate.
Retroactive Implementation and Duration:
The proposed amendment is intended to be retroactive, taking effect from the 1st day of July, 2022. It is slated to remain in effect through the tax year 2025, after which it will cease.
Rationale Behind the Amendment:
The Statement of Objects and Reasons accompanying the bill clarifies that its purpose is to enact the proposal detailed in the Income Tax (Second Amendment) Bill, 2025. This proposal is specifically focused on restoring the 25% tax rebate for full-time educators and researchers for the preceding two tax years (2023 and 2024) and the current tax year (2025). This move reverses the omission of the rebate by the Finance Act of 2022 and aligns with the current government’s objectives.
