Skip to content
BarrioVibe

Company formation

Tax Status for a Non-Profit in Pakistan

Two separate approvals do two different jobs. A SECP section 42 licence decides whether you may exist as a non-profit company. Commissioner approval under section 2(36) decides your tax status, lasts three years, and is what unlocks the section 100C credit. Neither implies the other, and a section 42 licence on its own confers no tax relief.

We do this for clients:Non-Profit Registration in Pakistan

Where these figures come from

Statutory basis
Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
Last checked against the statute
by BarrioVibe, which files income tax returns through FBR IRIS.

These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.

What section 2(36) actually requires

Three cumulative limbs, and organisations routinely satisfy the first two and forget the third.

  • Established for religious, educational, charitable or welfare purposes for the benefit of the general public, or for the promotion of amateur sport, excluding a recreational club whose joining fee for new members exceeds one million rupees
  • Formed and registered by or under any law as a non-profit organization
  • Approved by the Commissioner for a specified period, on a prescribed application
  • And no asset may confer, or be capable of conferring, a private benefit

The conditions attached to the credit

Section 100C(4). Missing any one of them costs the whole credit, not part of it.

  • The return has been filed
  • Tax required to be deducted or collected has been deducted or collected and paid
  • Withholding statements for the relevant year have been filed
  • Administrative and management expenditure does not exceed fifteen per cent of total receipts, which is disapplied where activities began within the last three years or total receipts are under one hundred million rupees
  • Approval by the Commissioner under section 2(36)
  • No portion of income or property confers a private benefit on donors, authors or their families
  • A statement of voluntary contributions has been filed

What a donor gets, and the limits on it

Section 61 gives the donor a tax credit rather than a deduction, computed on a formula. The amount taken into account is capped at the lesser of the actual donations or thirty per cent of taxable income for an individual or association, and twenty per cent for a company. Where the recipient is an associate of the donor, those caps are halved to fifteen and ten per cent.

Two practical conditions. A cash donation counts only where it is paid by crossed cheque, so cash given over a counter does not qualify. And eligible recipients are boards of education and universities, government-run institutions, any non-profit organization or any person eligible for the section 100C credit, and the twenty-eight bodies named in the Thirteenth Schedule.

Questions

The questionspeople ask

  • Does a SECP section 42 licence make my organisation tax exempt?

    No. Section 42 is a corporate-form licence deciding whether you may register as a non-profit company. Tax status comes from Commissioner approval under section 2(36), and the Ordinance lists a section 42 company as one of ten categories that must still obtain it.

  • Is the section 100C credit still a hundred per cent?

    Yes. Section 100C allows a credit equal to one hundred per cent of tax payable under any provision of the Ordinance, including minimum and final taxes, and the Finance Act 2026 did not amend it. What changed is that the Finance Act 2025 merged the clause (66) tables, so entities with a former straight exemption must now meet the section 100C conditions.

  • How long does non-profit tax approval last?

    Three years under rule 214, or until withdrawn under rule 217, whichever is earlier. Approval is notified in the gazette and may carry conditions, and applications are to be finalised within two months.

  • What are surplus funds and how are they taxed?

    Under section 100C(5) and (6), at ten per cent. Surplus funds are money not spent on charitable and welfare activities during the tax year, received that year as donations, contributions, subscriptions and other income, exceeding twenty-five per cent of total receipts, and not restricted by the donor. All four limbs must be met.

  • Is there a spending requirement for a non-profit?

    Effectively, through two provisions. Administrative and management expenditure must not exceed fifteen per cent of total receipts for the section 100C credit, disapplied for the first three years or where receipts are under Rs 100 million. And unspent unrestricted income above twenty-five per cent of receipts is taxed as surplus funds.

  • Can a trust get tax approval without registering with SECP?

    Yes. Trusts, waqfs, societies and welfare institutions can obtain section 2(36) approval from the Commissioner with no SECP involvement at all. The two approvals are independent in both directions.

  • What tax relief does a donor get?

    A credit under section 61, not a deduction, capped at the lesser of actual donations or thirty per cent of taxable income for an individual or association and twenty per cent for a company, halved where the recipient is an associate. Cash donations count only if paid by crossed cheque.

  • Can an approved non-profit stop tax being withheld from it?

    Section 159(1D), inserted by the Finance Act 2026, entitles a non-profit holding section 2(36)(c) approval for a tax year to a withholding exemption certificate for that whole tax year, rather than seeking relief transaction by transaction.

Also here

Relatedguides

Rather have someone handle it?

We file returns through IRIS every day. If the answer above raises a question about your own case, that is the conversation to have before the deadline rather than after it.

Talk to us