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Transfer to participatory reserve
(1) Subject to this section, a company shall be allowed a deduction for a tax year for any amount transferred by the company in the year to a participatory reserve created under section 66 of the Companies Act, 2017 (XIX of 2017) in accordance with an agreement relating to participatory redeemable capital entered into between the company and a banking company as defined in the Financial Institutions(Recovery of Finances) Ordinance,2001 (XLVI of 2001).
(2) The deduction allowed under subsection (1) for a tax year shall be limited to five per cent of the value of the company’s participatory redeemable capital.
(3) No deduction shall be allowed under subsection (1) if the amount of the tax exempted accumulation in the participatory reserve exceeds ten per cent of the amount of the participatory redeemable capital.
(4) Where any amount accumulated in the participatory reserve of a company has been allowed as a deduction under this section is applied by the company towards any purpose other than payment of share of profit on the participatory redeemable capital or towards any purpose not allowable for deduction or exemption under this Ordinance the amount so applied shall be included in the income from business of the company in the tax year in which it is so applied. Division IV Tax Accounting
(2) The deduction allowed under subsection (1) for a tax year shall be limited to five per cent of the value of the company’s participatory redeemable capital.
(3) No deduction shall be allowed under subsection (1) if the amount of the tax exempted accumulation in the participatory reserve exceeds ten per cent of the amount of the participatory redeemable capital.
(4) Where any amount accumulated in the participatory reserve of a company has been allowed as a deduction under this section is applied by the company towards any purpose other than payment of share of profit on the participatory redeemable capital or towards any purpose not allowable for deduction or exemption under this Ordinance the amount so applied shall be included in the income from business of the company in the tax year in which it is so applied. Division IV Tax Accounting
Amendment history (4)
- Inserted by the Finance Act, 2003.
- Sub-section (1) substituted by the Finance Act, 2003. The substituted sub-section (1)
- The words “Central Board of Revenue” substituted by the Finance Act, 2007.
- Substituted for the word “notice” by the Finance Act, 2003.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 84
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.