# Do Zakat, my children's tuition fees or my house loan reduce my salary tax?

Source: https://qanoondigest.com/faq/salaried-employees/zakat-tuition-home-loan-salary-tax-relief
Law current to: 30 June 2026. Reviewed: 2026-09-25. Checked line by line against the law: yes.

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## Short answer

Each can, in a different way. Section 60 deducts Zakat paid under the Zakat and Ushr Ordinance from income. Section 60D gives a small tuition allowance only where taxable income is under Rs. 1.5 million. Section 63A credits profit on a loan for one house up to 2,500 square feet or flat up to 2,000 square feet.

**Applies to:** Salaried individuals who pay Zakat, pay their children's school or college fees, or pay profit on a bank or government loan for their own house or flat.

## What does the law say?

The Income Tax Ordinance, 2001 treats these three expenses in two different ways.

**Deductible allowances** reduce taxable income. Section 9 defines taxable income as total income "reduced (but not below zero) by the total of any deductible allowances under Part IX". Zakat (section 60) and tuition fees (section 60D) are in this group.

**Tax credits** reduce the tax itself. Profit on a house loan (section 63A) is a credit worked out with the formula (A/B) x C, where A is tax before credits, B is taxable income and C is the amount allowed.

| Expense | Section | Type | Limit | Through payroll? |
|---|---|---|---|---|
| Zakat | 60 | Deductible allowance | Amount paid under the Zakat and Ushr Ordinance, 1980 | Not mentioned in section 149 |
| Children's tuition fee | 60D | Deductible allowance | Lesser of 5% of fees paid, 25% of taxable income, Rs. 60,000 per child; only if taxable income is under Rs. 1.5 million | No, section 60D(5) excludes it |
| Profit on house loan | 63A | Tax credit | Lesser of profit paid and 30% of taxable income | Not mentioned in section 149 |

## How does each one work in practice?

**Zakat.** The allowance covers Zakat "paid by the person in a tax year under the Zakat and Ushr Ordinance, 1980". The text does not extend it to Zakat given privately. Section 60(2) excludes Zakat already taken into account when computing income from other sources, and section 60(3) says any part that cannot be deducted in the year is not refunded or carried forward or back.

**Tuition fees.** Section 60D(1) allows the deduction only where "the taxable income of the individual is less than one and a half million rupees". Section 60D(4) lets either parent claim it, on giving the National Tax Number or name of the educational institution. Nothing unused carries forward. The text does not say whether the Rs. 1.5 million test is applied before or after the allowance itself, so this page does not decide that.

**House loan.** Section 63A was inserted by the Finance Act, 2025. The loan must come from a scheduled bank, a financial institution regulated by the Securities and Exchange Commission of Pakistan, Government, a Local Government, a statutory body or a listed public company, and must be used to build (including land) or buy one personal house with land area up to 2,500 square feet or a flat up to 2,000 square feet. Once claimed, section 63A(4) bars a credit for another house or flat for the next fifteen tax years. Section 63A(3) excludes profit already deductible against rental income. An earlier deductible allowance for profit on a house loan was omitted by the Finance Act, 2022, and survives in the consolidated text only as a footnote.

## Worked example (illustrative figures)

**Imran, a school administrator in Rawalpindi, tax year 2027.** Salary Rs. 1,400,000. Zakat of Rs. 30,000 was deducted under the Zakat and Ushr Ordinance. He paid Rs. 400,000 in tuition fees for two children.

1. **Tuition allowance.** Lesser of 5% of Rs. 400,000 = Rs. 20,000; 25% of taxable income (well above Rs. 20,000); and Rs. 60,000 x 2 = Rs. 120,000. Allowance = **Rs. 20,000**.
2. **Taxable income.** Rs. 1,400,000 - Rs. 30,000 - Rs. 20,000 = **Rs. 1,350,000**.
3. **Tax.** The clause (2) salaried table taxes income from Rs. 1,200,000 to Rs. 2,200,000 at Rs. 6,000 plus 11% of the amount above Rs. 1,200,000. Rs. 6,000 + 11% of Rs. 150,000 = **Rs. 22,500**.
4. **Without the allowances.** Rs. 6,000 + 11% of Rs. 200,000 = Rs. 28,000. The two allowances save Rs. 5,500.

**Hina, an engineer in Faisalabad, tax year 2027.** Salary Rs. 3,000,000. She paid Rs. 250,000 of profit to a scheduled bank on a loan used to buy a house on a plot of 1,800 square feet.

1. **Tax before credit (A).** Rs. 116,000 + 20% of (3,000,000 - 2,200,000) = **Rs. 276,000**.
2. **Average rate (A/B).** 276,000 / 3,000,000 = 9.2%.
3. **C.** Lesser of Rs. 250,000 and 30% of Rs. 3,000,000 (Rs. 900,000) = Rs. 250,000.
4. **Credit.** 9.2% x Rs. 250,000 = **Rs. 23,000**. Tax after credit = Rs. 253,000.

## What if my employer already deducted the full tax?

Section 149(1) lists only tax withheld under other heads and the donation and pension fund credits as adjustments. Imran's employer would deduct on Rs. 1,400,000, so the Rs. 5,500 difference would be settled when his tax for the year is worked out. The same applies to Hina's credit.

## Common mistakes

- **Assuming the tuition allowance equals the fee paid.** The first limit is five per cent of the fee.
- **Claiming tuition allowance on a higher income.** It is available only where taxable income is under Rs. 1.5 million.
- **Using the old house loan allowance.** That provision was omitted in 2022; section 63A is the current rule and has size limits.
- **Claiming a second property.** Section 63A covers one house or flat, then locks out another claim for fifteen tax years.

## What to check in the official text

Read sections 9, 60, 60D and 63A in the Ordinance amended to 30 June 2026, and the Zakat and Ushr Ordinance, 1980 (not in this corpus) for what counts as Zakat paid under it.

## Frequently asked

### Is Zakat deducted from my income or from my tax?

From income. Section 60 makes Zakat paid under the Zakat and Ushr Ordinance, 1980 a deductible allowance, and section 9 reduces total income by deductible allowances to arrive at taxable income. The saving therefore depends on the slab rate that applies to the top part of your income, not on a fixed percentage.

### Why is the tuition fee allowance so small?

Section 60D(2) caps it at the lesser of five per cent of the tuition fee paid, twenty-five per cent of taxable income, and sixty thousand rupees multiplied by the number of children. On Rs. 400,000 of fees the first limit gives Rs. 20,000.

### Can my employer reduce my monthly tax for these?

Section 60D(5) says the tuition allowance is not taken into account for deduction under section 149. Section 149(1) mentions only tax withheld under other heads and the donation and pension fund credits, so it does not mention Zakat or the house loan credit either. These reliefs are claimed when your tax for the year is computed.

## Citations

- [Income Tax Ordinance, 2001, section 60 (Zakat)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30#60-zakat), as amended to 2026-06-30: "A person shall be entitled to a deductible allowance for the amount of any Zakat paid by the person in a tax year under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980)." Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf
- [Income Tax Ordinance, 2001, section 60D (Deductible allowance for education expenses)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30#60d-deductible-allowance-for-education-expenses), as amended to 2026-06-30: "an amount computed by multiplying sixty thousand with number of children of the individual." Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf
- [Income Tax Ordinance, 2001, section 63A (Tax credit for interest paid on low-cost housing loan)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30#63a-tax-credit-for-interest-paid-on-low-cost-housing-loan), as amended to 2026-06-30: "construction (including land) or acquisition of one personal house having land area up to two thousand five hundred square feet or flat having total area up to two thousand square feet." Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf
- [Income Tax Ordinance, 2001, section 9 (Taxable income)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30#9-taxable-income), as amended to 2026-06-30: "reduced (but not below zero) by the total of any deductible allowances under Part IX of this Chapter of the person for the year." Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf
- [Income Tax Ordinance, 2001, section 149 (Salary)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30#149-salary), as amended to 2026-06-30: "adjustment of tax withheld from employee under other heads and tax credit admissible under section 61" Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf
- [Income Tax Ordinance, 2001, First Schedule, Part I, Division I, clause (2)](https://qanoondigest.com/ordinances/income-tax-ordinance-2001/income-tax-ordinance-2001-2026-06-30), as amended to 2026-06-30 Official source: https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf