ISLAMABAD: The Federal Board of Revenue (FBR) has reported a massive surge in tax benefits provided to the electricity generation sector.
According to the Tax Expenditure Report 2025, the annual income tax exemption allowed to electricity generation companies increased by 173 percent during the tax year 2023–24.
The report highlighted that electricity companies availed income tax exemptions worth Rs82 billion in 2023–24 under Clause 132 of Part I of the Second Schedule of the Income Tax Ordinance, 2001. This represents a sharp rise compared with Rs30 billion claimed in the preceding tax year.
The FBR clarified that these exemptions are designed to encourage investment in electricity generation projects within Pakistan. Profits and gains derived by a taxpayer from an eligible electricity generation project are exempted, provided certain legal and operational conditions are fulfilled.
Conditions for Exemption
• The project must be owned and operated by a company registered under the Companies Ordinance, 1984, with its head office located in Pakistan.
• It must not result from the division, reconstruction, or transfer of an already existing business or from the use of previously utilized machinery and equipment.
• The ownership structure must ensure that at least 50 percent of the company’s shares are not controlled by the federal, provincial, or local governments.
Additionally, the exemption also extends to expansion projects of existing Independent Power Producers (IPPs) already functioning in the country.
The FBR noted that such tax incentives are aimed at boosting investment in Pakistan’s power sector, reducing reliance on imported fuels, and promoting sustainable development. By facilitating electricity projects through fiscal relief, the government seeks to strengthen energy security and attract long-term private sector participation.
