Contributions made in Voluntary Pension Scheme during any one tax year (July 1 to June 30) shall be entitled to a tax credit under Section 63 of the Income Tax Ordinance 2001.
This effectively means that the investor will be allowed tax credit equal to the effective tax on contribution.
The tax liability may be reduced for both self-employed and salaried individuals. You can avail tax credit at your average rate of tax on amount of actual contribution or 20% of your annual taxable income whichever is lower. For participants joining the VPS at 41 years or above and additional tax credit of 2% is allowed for every year over 41 years; the maximum tax credit allowed shall be 50% of the annual tax credit. The additional tax credit is allowed for ten years starting from July 1, 2006.
