39. Allowances for life insurance.- (1) Subject to the provisions of section 45,-
(a) an assessee, being an individual, shall be entitled to an allowance for life insurance in respect of any premium paid by him in any income year to effect an insurance, including a contract for deferred annuity, on his own life or the life of his spouse; and

(b) where the assessee is a Hindu undivided family, it shall be entitled to an allowance for life insurance in respect of any premium paid by it in the income year to effect an insurance on the life of any male member of the family or the wife of any such male member.

(2) The provisions of sub-section (1) shall not apply,-
(a) in respect of so much of any premium paid to effect an insurance other than a contract for deferred annuity as exceeds ten percent of the capital sum assured; and
(b) unless the premium and the proceeds of the life insurance policy or the contract for deferred annuity, as the case may be, are both payable in Pakistan.

(3) Where any insurance policy to which sub-section (1) applies lapses or is surrendered or paid up within thirty-six months of the date on which it became effective, then, notwithstanding anything contained in this Ordinance, the amount of tax payable by the assessee under the other provisions of this Ordinance in respect of the income year in which such policy lapses or is surrendered or paid up, as the case may be, shall be increased by an amount equal to the relief in tax allowed to the assessee in respect of such policy (hereinafter referred to as the 'said amount') and the sum so arrived at, or where no tax is payable by the assessee under the other provisions of this Ordinance in respect of that income year, the said amount, shall be deemed to be the tax payable in respect of that income year and all the provisions of this Ordinance shall, so far as may be, apply accor-dingly.

(4) No order under sub-section (3) shall be made without giving the assessee a reasonable opportunity of being heard.

40. Allowance for contributions to Provident Funds, etc.- Subject to the provisions of section 45, an assessee shall be entitled to an allowance in respect of-
(a) any sum deducted in the income year from the salary payable to him by Government, being a sum deducted in accordance with the conditions of his service, for the purpose of secur-ing to him a deferred annuity or making provision for his wife or children, in so far as the sum so deducted does not exceed twenty percent of the salary;

(b) any contribution made by' him in the income year to any provident fund to which the Provident Funds Act, 1925 (XIX of 1925) applies;

(c) any contribution (not exceeding twenty per cent of his salary) made by him in the income year to a recognised provident fund.

Explanation.- As used in this clause "salary" shall have the meaning assigned to it in clause (h) of rule 14 of Part I of the Sixth Schedule;

(d) any contribution made by him in the income year to any approved superannuation fund.

41. Allowance for investment in Defence Savings and NIT Certificates, etc.- (1) Subject to the provisions of section 45, an assessee (not being a company) shall be entitled to an allowance in respect of any sum invested by him in the income year in the purchase of-
(a) Defence Savings Certificates;

(b) Unit (Trust) certificates (not being Bearer Certificates) issued by the National Investment (Unit) Trust of Pakistan and such Government Securities (including Development Loans) as may be specified by the Central Board of Revenue in this behalf;

(c) Certificates (other than Certificates acquired by purchase or otherwise from a previous holder thereof) of Mutual Funds issued by the Investment Corporation of Pakistan;

(d) such shares of such Pakistani investment companies (other than shares acquired by purchase or otherwise from a previous holder thereof) as may be specified by the Central Board of Revenue for the purposes of this clause;

(e) such debentures or debentures stock (other than debentures or debenture stock acquired by purchase or otherwise from a previous holder thereof)issued by such public companies as may be approved by the Central Board of Revenue for the purposes of this clause; [ ]

(f) such stocks and shares (other than stocks and shares acquired by purchase or otherwise from a previous holder thereof) of such a Pakistani industrial public company as may be approved by the Central Board of Revenue for the purposes of this clause.

Explanation.- As used in this clause, and sub-section (2) of section 43, "Pakistani indust-rial public company" means a public company within the meaning of clauses (a) and (b) of subparagraph (2) of paragraph B of Part IV of the First Schedule which is formed for the purpose of, or is actually engaged in, the carrying on of an industrial undertaking set up in Pakistan on or after the fourteenth day of August, 1947, provided such undertaking (i) is owned by such company and (ii) fulfills the conditions specified in clauses (a), (d) and (e) of sub-section (2) of section 48; and includes any public company engaged in, or formed for the purpose of, carrying on insurance or transport business or the business of building residential houses for sale in Pakistan or any business in the case of a Government sponsored finance corpora-tion approved by the Central Board of Revenue or the Controller of Capital Issues for the purposes of this section ;

(g) Modaraba Certificates (other than Certificates acquired by purchase or otherwise from a previous holder thereof) of a modaraba of specific value issued by a modaraba company;

(h) Modaraba certificates of a modaraba of non-specific value issued by a modaraba company; and

(i) Participation Term Certificates (other than Certificates acquired by purchase or other-wise from a previous holder thereof) issued by a company.

(1A) Notwithstanding anything contained in sub-section (1), the Central Board of Revenue may, in the case of any company applying for approval, grant approval under this section before the industrial undertaking for the purpose of which it is formed is set up or has commenced commercial production or may grant approval from such date, whether preceding or following the date on which the approval is granted, as it may specify in this behalf.

[2. ]

(3) Where any certificate, security, share, debenture or debenture stock (hereinafter referred to as the 'Certificate') to which clauses (a), (b), (d) , (e), (h) and (i) of sub-section (1) applies and in respect of which any relief in tax has been allowed to the assessee is disposed of by sale, transfer or in any other manner within thirty-six months of the date of its purchase, then, notwithstanding anything contained in this Ordinance, the amount of tax payable by the assessee under the other provisions of this Ordinance in respect of the income year in which such Certificate was so disposed of shall be increased by an amount equal to the relief in tax allowed to the assessee in respect of such Certificate (hereinafter referred to as the 'said amount'), and the sum so arrived at or, where no tax is payable by the assessee under the other provisions of this Ordinance in respect of that income year, the said amount shall be deemed to be the tax payable in respect of that income year and all the provisions of this Ordinance shall, so far as may be, apply accordingly.

(3A) Where a company has been approved for purposes of clause (f) of sub-section (1) on the basis of an undertaking given by such company to the effect that its shares shall be made subject of dealing in a registered stock exchange in Pakistan within the period specified in the said undertaking, and it is subsequently found that the said company has not complied with the terms of the said undertaking, the Central Board of Revenue may cancel the approval already given from the date it took effect, and the amount of tax payable by an assessee under the other provisions of this Ordinance in respect of the income year in which the approval was cancelled shall be increased by an amount equal to the relief in tax allowed to the assessee in respect of the purchase of stocks and shares of the said compa-ny, and the sum so arrived at or, where no tax is payable by the assessee under the other provisions of this Ordinance in respect of that income year, the said amount shall be deemed to be the tax payable in respect of that income year and all the provisions of this Ordinance shall, so far as may be, apply accordingly.

(4) No order under sub-sections (3) and (3A) shall be made without giving the assessee a reasonable opportunity of being heard.

(5) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.
41A.  Allowance for investment in shares.- (1) An assessee, other than a company, shall be entitled to an allowance not exceeding ten per cent of his income or one hundred thousand rupees, whichever is the less, invested in the income year commencing on or after the first day of July, 2001, in the purchase of new shares offered to the public by a public company listed on a stock exchange in Pakistan provided that the assessee is the original allottee of such shares, or listed shares, sold by the Privatization Commission of Pakistan.

(2) Where any share to which sub-section (1) applies and in respect of which any relief in tax has been allowed to the assessee is disposed of by sale, transfer or in any other manner within twelve months of the date of its purchase, then, notwithstanding anything contained in this Ordinance, the amount of tax payable by the assessee under the other provisions of this Ordinance in respect of the income year in which such share was so disposed of shall be increased by an amount equal to the relief in tax allowed to the assessee in respect of such shares (hereinafter referred to as the  `said amount'), and the sum so arrived at or, where no tax is payable by the assessee under the other provision of this Ordinance in respect of that income year, the said amount shall be deemed to be the tax payable in respect of that income year and all the provisions of this Ordinance shall, so far as may be, apply accordingly.";

42. Allowance for purchase of books.- An assessee shall be entitled to an allowance in respect of any sum expended by him in the income year on the purchase of books of religious or professional or technical nature or of scientific or general knowledge.

Provided that purchase receipt is furnished containing National Tax Number of the book seller. This proviso shall not apply in case of books imported by the assessee for his own use.

43. Exemption of investments in the share-capital of approved investment, holding and industrial companies.- (1) Subject to the provisions of section 45, the tax shall not be payable by an assessee, not being a company, on such portion of his total income as is invested by him in the income year on the acquisition (otherwise than from the previous shareholders) of the shares of a Pakistani company which fulfills the conditions specified in sub-section (2).

(2) The following are the conditions referred to in sub-section (1), namely:-
(a) that it is-
(i) an investment company; or
(ii) a holding company; or
(iii) a Pakistani industrial public company, the share-capital of which is owned, wholly or in part, and the management of whose affairs is controlled, directly or indirectly, by the Federal Government; and

(b) that it is approved by the Central Board of Revenue for the purposes of this section.

(3) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.

44. Retirement annuity contracts and trust schemes.- (l) Subject to such rules as may be made in this behalf, where an individual, being a resident of Pakistan, is (or would, but for the loss or profits or gains, be) chargeable to tax-

(a) in respect of any salary or remuneration from an office or employment held by him, which is not a pensionable office or employment or which does not provide any other retirement benefits; or

(b) in respect of profits or gains accruing or arising from any business or profession carried on by him,

he shall, subject to the provisions of section 45, be entitled to an allowance in respect of any sum paid by him in the income year under a contract of annuity with the State Life Insurance Corporation of Pakistan or the Pakistan Post Office Life Insurance Department having for its main object the provision for him of an annuity in old age, provided such contract is approved by the Commissioner for the purposes of this section.

(2) Nothing contained in this section shall apply to any amount in respect of which an allowance has been made under section 44A.

44A. Retirement annuity contract for professionals.-(1) Where an assessee, being an individual who is resident in Pakistan, derives income from the exercise of a profession as an accountant, actuary, lawyer, architect, medical or veterinary physician or surgeon, or from such other professions as may be notified by the Central Board of Revenue for the purpose of this section, either independently or as a partner in a registered firm carrying on such profession, and has paid, out of his income from such profession in any income year, any amount in that year as a premium under an annuity contract scheme, approved by the Central Board of Revenue, having for its main object the provision to the assessee of a life annuity in old age, he shall, subject to the provisions of sub-sections (2), (3), (4) and (5), be allowed an allowance in respect of the said amount in that year.

(2) The amount of the allowance under sub-section (1) shall not exceed five per cent of the income from such profession or ten thousand rupees, whichever is the less.

(3) No assessee shall be entitled to the allowance under sub-section (1) if he is entitled, on his retirement, to a pension or other benefits.

(4) No allowance shall be made under sub-section (1) in respect of a contract which provides-

(a) for the payment during the life of the assessee of any sums besides the sums payable as annuity;
(b) for the annuity payable to the assessee to commence before he attains the age of sixty or after he attains the age of seventy;
(c) that the annuity shall be capable, in whole or in part, of surrender, commutation or assignment; or
(d) for payment of the annuity outside Pakistan.

(5) Nothing contained in this section shall apply to any amount in respect of which an allowance has been made under section 44.

44AA.  Retirement annuity scheme.- (1) Where an individual, being a resident of Pakistan, is (or would but for the loss of profit or gains, be) chargeable to tax,-

(a) in respect of any salary or remuneration from an office or employment held by him which is not a pensionable office or employment or which does not provide any other retirement benefits; or

(b) in respect of profit and gains, accruing or arising, from any business or profession carried on by him,

he shall be entitled to an allowance in respect of any sum paid by him in the income year commencing on or after the first day of July, 2001, by way of contribution or premium under a contract of annuity scheme approved by SECP of an insurance company duly registered under the Insurance Ordinance, 2000 (XXXIX of 2000), having for its main object   the provision to the assessee of an annuity in old age.

(2) The amount of allowance under sub-section (1) in a year shall not exceed five per cent of the income or fifty thousand rupees whichever is the less.

(3) No allowance shall be made under sub-section (1) in respect of a contract which provides-
(a) for the payment during the life of the assessee of any sums besides the sums payable as annuity;
(b) for the annuity payable to the assessee to commence before he attains the age of sixty years;
(c) that the annuity shall be capable in whole or in part, of surrender, commutation or assignment; or
(d) for payment of the annuity outside Pakistan.

44AAA.- Allowance for mark up paid.- (1) An assessee shall be entitled to an allowance in respect of any mark up paid by him in an income year on a loan sanctioned and advanced on, or after, the first day of July, 2001, not exceeding six hundred thousand rupees by a Scheduled Bank under a house finance scheme approved by the State Bank of Pakistan or advanced by Government or a local authority or House Building Finance Corporation:

Provided that --
(a) the maximum amount eligible for an allowance shall not exceed twenty five per cent of the income or fifty thousand rupees – whichever is the less;
(b) the loan is utilized for construction of new house or the acquisition  of a house; and
(c) no deduction for mark up has been claimed under clause (e) or (ee) of sub-section (1) of section 20

44B. Allowance for make up paid.-

48. Exemption from tax of newly established industrial undertakings.- (1) Subject to the provisions of this section, there shall be exempt from the tax payable under this Ordinance so much of the profits and gains derived by an assessee from an industrial undertaking, to which this section applies, as does not exceed an amount computed with reference to the capital employed in the undertaking as hereinafter provided.

(2) This section applies to an industrial undertaking (hereinafter referred to as the "said undertaking") which fulfills the following conditions, namely:-
(a) that it is an undertaking engaged in the manufacture of goods or materials, or the subjection of goods or materials to any such process, ship-building and navigation, or the generation, transformation, conversion, transmission, distribution or supply of electrical energy or hydraulic power; or

(b) that it is an industrial undertaking which is approved by the Central Board of Revenue for the purposes of this section;

(c) that it is set up by a Pakistani company in the areas specified in clauses (119), (120), (121) and (122) off the Second Schedule or in an industrial estate approved by the Central Board of Revenue and located in the territories of Pakistan (excluding Talukas of Karachi and Hyderabad, and Tehsils of Faisalabad and Lahore, and such adjoin-ing areas of Lahore Tehsil as may be notified in this behalf by the Federal Government);

(d) that it employs ten or more workers and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency; or twenty or more workers and does not involve the use of electrical energy or any other form of energy which is mechanically transmitted;-

(e) that it is not formed by the splitting up or the reconstruction or reconstitution of business already in existence or by transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at any time before the commencement of the new business; and

(f) that it has commenced commercial production at any time between the first day of July, 1975 and the thirtieth day of June, 1988 (both dates inclusive).

(3) The amount referred to in sub-section (1) is a sum (hereafter in this sub-section and sub-section (4) referred to as the "said sum") equal to ten per cent of the capital employed in the said undertaking;

(4) The said sum shall be subject to an adjustment where the profits and gains of the said undertaking, computed for any year of assessm-ent, cover a period which is less than, or exceeds, twelve months, the adjustment decreasing or increasing, as the case may be, the said sum to an amount bearing the same proportion to the said sum as the said period bears to a period of twelve months.

(5) The profits and gains of the said undertaking shall be computed in the same manner as is applicable to income chargeable under the head "Income from business or profession".