How can Alfalah Assist?
How can Alfalah Assist?
Thank you for choosing Alfalah Investments as your trusted financial partner. We wanted to update you regarding a few important changes related to taxation on Mutual Funds, effective from 1st July, 2025. The changes are as follows:
Under Clause (99) of Part I of the Second Schedule to the Income Tax Ordinance, 2001 (the Ordinance), Mutual Funds are exempt from Income Tax provided that at least 90% of the year’s income, excluding realized and unrealized capital gains, is distributed to Unit Holders as dividends.
Additionally, Clause (47B) of Part IV of the Second Schedule to the Ordinance, exempts Mutual Funds from any withholding tax on profits and dividends.
The following information is provided for general informational purposes only. Since tax implications vary individually, investors are encouraged to consult their Tax advisor to understand the specific tax consequences of investing in mutual funds.
As per section 150 of the Ordinance, unit holders of mutual funds will be subject to Income Tax on Dividend Income received from a mutual fund as under:
| Tax Payer | Proportional income derived by mutual fund from average annual investments in | |
|---|---|---|
| Equities | Debt Securities | |
| Company | 15% | 29% |
| Individual/AOP | 15% | 25% |
As per section 37A of the Ordinance, CGT is required to be withheld at source by mutual funds at the rates as specified below, on redemption of securities:
| Tax Payer | Stock Funds | Other Funds |
|---|---|---|
| Company | 15% | 25% |
| Individual/AOP | 15% | 15% |
No CGT shall be deducted, if the holding period of the security acquired on or before 30th June 2024 is more than six years.
Muslim citizens of Pakistan, and others who fall under the definition of Sahib-e-Nisab, are subject to a Zakat deduction of 2.5% on the value of their units, as per the Zakat and Ushr Ordinance, 1980 (XVII of 1980). This deduction is made at the source from the redemption proceeds, unless the Unit Holder provides a Zakat Affidavit (Form CZ50) declaring they are exempt from paying Zakat according to their Fiqh.
Disclaimer: This publication is for general informational purposes only and nothing herein should be construed as a solicitation, recommendation, or an offer to buy or sell any fund. All investments in mutual funds are subject to market risks. Past performance is not necessarily indicative of future results. Please read the Offering Document to understand the investment policies and risks involved.
Contributions or premiums paid in approved pension fund under Voluntary Pension System Rules 2005 (VPS) during a tax year (July 1 to June 30) are entitled to a tax credit under Section 63 of the Ordinance. The tax credit for a given year is calculated using the formula:
(A/B) x C, where:
Employees can submit proof of contributions / premium paid by June 30 to their employer, who may then adjust the tax credit allowable under Section 63 from the tax to be deducted from salary under Section 149(i) of the Ordinance. Self-employed individuals may claim the tax credit when filing their annual tax return.
If a participant withdraws funds from a VPS before retirement, or withdraws accumulated balance in excess of 50% at the time of or after retirement, the Pension Fund Manager will deduct withholding tax at a rate equal to the participant’s average tax rate over the preceding three years.
Enjoy significant tax rebates at Alfalah Investments and maximize your savings. You can claim tax deductions on your taxable income, depending on your income bracket. Whether you’re in a higher or lower tax slab, VPS offers a simple way to grow your retirement savings while benefiting from these tax advantages.
Check the table below to calculate your tax savings based on your salary slab and start growing your retirement fund with Alfalah Investments today!
| Taxable Salary | Applicable Tax Rate | Tax Payable | Investment Required for Tax Credit in VPS | Tax Bachat | ||
|---|---|---|---|---|---|---|
| Monthly | Annually | Monthly | Annually | |||
| 60,000 | 720,000 | 0.17% | 100 | 1,200 | 144,000 | 240 |
| 70,000 | 840,000 | 0.29% | 200 | 2,400 | 168,000 | 480 |
| 80,000 | 960,000 | 0.38% | 300 | 3,600 | 192,000 | 720 |
| 90,000 | 1,080,000 | 0.44% | 400 | 4,800 | 216,000 | 960 |
| 100,000 | 1,200,000 | 0.50% | 500 | 6,000 | 240,000 | 1,200 |
| 150,000 | 1,800,000 | 4.00% | 6,000 | 72,000 | 360,000 | 14,400 |
| 200,000 | 2,400,000 | 6.75% | 13,500 | 162,000 | 480,000 | 32,400 |
| 250,000 | 3,000,000 | 10.08% | 25,000 | 299,900 | 600,000 | 60,000 |
| 300,000 | 3,600,000 | 12.94% | 38,833 | 466,000 | 720,000 | 93,200 |
| 350,000 | 4,200,000 | 15.50% | 54,250 | 651,000 | 840,000 | 130,200 |
| 400,000 | 4,800,000 | 17.94% | 71,750 | 861,000 | 960,000 | 172,200 |
| 500,000 | 6,000,000 | 21.35% | 106,750 | 1,281,000 | 1,200,000 | 256,200 |
| 600,000 | 7,200,000 | 23.63% | 141,750 | 1,701,000 | 1,440,000 | 340,200 |
| 800,000 | 9,600,000 | 28.47% | 227,750 | 2,733,000 | 1,920,000 | 546,200 |
| 1,000,000 | 12,000,000 | 30.71% | 307,108 | 3,685,290 | 2,400,000 | 737,058 |
| 1,200,000 | 14,400,000 | 31.95% | 383,408 | 4,600,890 | 2,880,000 | 920,178 |
| 1,500,000 | 18,000,000 | 33.19% | 497,858 | 5,974,290 | 3,600,000 | 1,194,858 |
| 1,800,000 | 21,600,000 | 34.12% | 614,208 | 7,370,490 | 4,320,000 | 1,469,538 |
| 2,000,000 | 24,000,000 | 34.43% | 688,608 | 8,263,290 | 4,800,000 | 1,652,658 |
| 2,400,000 | 28,800,000 | 35.05% | 841,208 | 10,094,490 | 5,760,000 | 2,018,898 |
| 2,800,000 | 33,600,000 | 35.49% | 993,808 | 11,925,690 | 6,720,000 | 2,385,138 |
| 3,000,000 | 36,000,000 | 35.67% | 1,070,408 | 12,844,290 | 7,200,000 | 2,568,858 |
| 3,200,000 | 38,400,000 | 35.83% | 1,146,408 | 13,756,890 | 7,680,000 | 2,751,378 |
| 3,600,000 | 43,200,000 | 36.08% | 1,298,808 | 15,585,990 | 8,640,000 | 3,117,638 |
| 4,000,000 | 48,000,000 | 36.28% | 1,451,608 | 17,419,290 | 9,600,000 | 3,483,858 |
Note 1: Where taxable income exceeds Rs. 10 million, tax liability includes surcharge under section 44B of the Ordinance, at the rate of 9% of tax payable.
Note 2: According to Section 63 of the Income Tax Ordinance, 2001, an individual Pakistani holding a valid CNIC/NICOP may claim a tax credit at the average tax rate on contributions made to Voluntary Pension Schemes during the Tax year, up to a maximum of twenty percent (20%) of his/her taxable income for that year.
The tax credit and tax savings shown are applicable for the current tax year. The individual’s ability to fully from salary for the entire tax year. Actual tax liabilities may vary due to multiple factors. Investors are advised to consult their tax advisor for financial planning and to ascertain the total tax credit amount applicable to their specific circumstances.
Disclaimer: All investments in Voluntary Pension Schemes are subject to market risks. The NAV of the fund is dependent on several factors including force majeure. Please read the Offering Document carefully to understand the investment policies and risks involved. Tax credit information is based on current tax laws which may be subject to change. Past performance is not necessarily indicative of future results and the unit prices and investment returns may go down, as well as up. No guarantee of the tax credit is implied or offered. The information is for general information only and does not take into account your individual objectives, financial situation or needs. Before making an investment decision, you should consider obtaining financial and tax advice. Withdrawals from Voluntary Pension Schemes before retirement may have tax implications.
