LAHORE: District Accounts Offices (DAOs) have informed the Federal Tax Ombudsman (FTO) that the FBR field formations have never issued any guidelines or instructions regarding the adjustment of taxes withheld from salaried individuals.
It was observed during an investigation by the FTO office that salaried individuals are subjected to excess tax deductions under Section 149 at the stage of deduction at source, despite qualifying for the benefit under Clause (2) of Part III of the Second Schedule to the Income Tax Ordinance, 2001.
All DAOs agree that currently, tax is withheld through an automated SAP system which only provides for monthly deductions at an average rate, with final adjustments made in June each year. This SAP system was configured by AGPR and FBR and adopted by AG Punjab. Consequently, the DAOs have expressed their inability to adjust deductible taxes, even if the salaried individuals provide details of tax deducted under various other withholding sections of the Ordinance.
The FTO had sought information from DAOs in Multan, Khanewal, Muzaffargarh, D.G. Khan, Layyah, and Rajanpur based on complaints from academic teachers regarding excess tax deductions and the subsequent hardships faced by taxpayers.
According to an order issued by the FTO office, it is observed that the current withholding procedure at the DAO level does not align with the intent of the legislature as outlined in Section 149 of the Ordinance.
The FTO has directed the FBR, AGPR, and AG Punjab to implement changes in the SAP module to allow adjustments of tax deducted under various provisions of the Ordinance and tax credits. This will enable timely credit for salaried individuals and pensioners and circumvent the lengthy process of refund issuance as per Section 170 of the Ordinance. Additionally, the FBR is required to develop a robust monitoring mechanism to prevent misuse of the facility at the withholding stage.
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