The Finance Act, 2025, has brought long-awaited relief for full-time teachers and researchers in Pakistan by reviving the 25% tax rebate that had been withdrawn earlier. This amendment addresses a major concern raised by the academic and research community after the rebate was discontinued from tax year 2023 onwards.
This article explains the legal background, scope of the amendment, eligible tax years, and practical implications of the newly inserted clause (3A) in Part III of the Second Schedule to the Income Tax Ordinance, 2001.
Background: Earlier Tax Rebate for Teachers and Researchers
Previously, full-time teachers and researchers were entitled to a 25% tax rebate against tax payable under sub-clause (2) of clause (1) of Part III of the Second Schedule to the Income Tax Ordinance, 2001.
This tax concession was available until tax year 2022 and recognized the contributions of educators and researchers to national development.
However, the relevant provision was omitted, resulting in the withdrawal of the rebate from tax year 2023 onward. Consequently, full-time teachers and researchers were taxed at normal applicable rates without any rebate for tax years 2023 and 2024.
Withdrawal of Rebate from Tax Year 2023
Due to the omission of the relevant sub-clause:
- No tax rebate was available for:
- Tax Year 2023
- Tax Year 2024
- Full-time teachers and researchers faced a higher effective tax burden
- The omission created uncertainty and dissatisfaction among academic professionals
This gap continued until the enactment of the Finance Act, 2025, on August 02, 2025.
Read more: How to File a Tax Return for Salary Person in 2026 in Pakistan
Reintroduction of Tax Rebate
The Finance Act, 2025, has now reintroduced the 25% tax rebate by inserting a new clause (3A) in Part III of the Second Schedule to the Income Tax Ordinance, 2001.
Key Highlights of the Amendment
- A 25% tax rebate against tax payable is restored
- Applicable specifically to:
- Full-time teachers
- Full-time researchers
- Inserted through clause (3A) of Part III of the Second Schedule
- Introduced via the Finance Act, 2025
This amendment partially restores the relief that was previously available to the academic community.
Applicable Tax Years: Limited Time Relief
A critical aspect of this amendment is its limited duration.
Tax Rebate Available For:
- Tax Year 2023
- Tax Year 2024
- Tax Year 2025
Tax Rebate Not Available For:
- Tax Year 2026 and onwards
The law clearly states that the rebate is available for only three tax years, after which it will automatically cease unless extended by future legislation.
Who Qualifies as a Full-Time Teacher or Researcher?
Although the amendment restores the rebate, eligibility remains subject to existing interpretations under tax law and FBR practice. Generally:
- The individual must be employed on a full-time basis
- Teaching or research must be the primary occupation
- Employment should be with a recognized educational or research institution
- Proper documentation and salary evidence may be required during filing or audit
Part-time, visiting, or contractual staff may not qualify unless explicitly recognized as full-time under relevant rules.
Learn more: Salary person tax return course
Practical Impact on Taxpayers
For eligible teachers and researchers, this amendment can result in:
- Reduction of 25% in tax payable
- Improved net take-home income
- Opportunity to claim a rebate while filing returns for the relevant tax years
- Potential refunds or adjustments if tax was already paid without a rebate
Taxpayers should ensure that their Income Tax Return and supporting schedules are accurate.
Conclusion
The Finance Act, 2025, has provided much-needed relief by reintroducing the 25% tax rebate for full-time teachers and researchers, albeit for a limited period. While the amendment applies to tax years 2023 to 2025, the discontinuation in tax year 2026 highlights the temporary nature of this relief.
Eligible individuals should take full advantage of this provision while it remains available and stay informed about future tax changes that may impact the academic sector.
