Govt Offers Tax Credit on Interest Paid for Low-Cost Housing Loans

The government has introduced a new tax credit through Section 63A of the Finance Act 2025, allowing individuals to claim tax benefits on interest paid for low-cost housing loans. According to the new provision, individuals will be entitled to a tax credit against any profit on debt, share in rent, or share in appreciation of a home’s value, provided the loan is taken from a scheduled bank, a financial institution regulated by the Securities and Exchange Commission of Pakistan (SECP), or a government-linked entity. The credit applies when the loan is used for constructing or acquiring a personal house with a land area of up to 2,500 square feet or a flat of up to 2,000 square feet. To encourage affordable housing, the tax credit will be limited to the lesser of either the actual markup paid or 30 percent of the individual’s taxable income on defined area limits.