FTO Issues Order on Excess Tax Deductions Complaint Filed by Teachers

Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) and Accountant General of Pakistan Revenue (AGPR) to allow adjustment of tax deducted under various provisions of the Income Tax Ordinance 2001 and tax credits, enabling the salaried individuals/pensioners for timely credit without going through a long process of refunds. Own Motion investigation was initiated by FTO Secretariat, Islamabad under Section 9(1) of the FTO Ordinance, 2000 based on the complaints in the cases of complainant teachers Qurrat-ul-Ain Qadeer, Sumera Sajid, Majida Ahmad, Andleeb Fatima and Asma Bukhhari regarding excess tax deductions and subsequent ordeal faced by the taxpayers and hardships faced by salaried taxpayers. It was observed during investigation of above complaints that all of the complainants are subjected to excess tax deductions u/s 149 at the stage of deduction at source, despite the fact that they fully qualify the benefit under Clause (2) of Part Ill of Second Schedule to the Income Tax Ordinance, 2001. According to an order issued by the FTO office on Friday, it is observed that the current withholding procedure of tax deduction in vogue at DAOs level is not in conformity with the intent of the legislature as laid down under Section 149 of the Ordinance FTO has recommended that the FBR. AGPR and AG, Punjab may consider the requisite changes in the SAP module enabling it to allow adjustment of tax deducted under various provisions of the Ordinance and tax credits, enabling the salaried individuals/pensioners for timely credit and to circumvent long process of refund issuance in terms of Section 170 of the Ordinance. The FBR should evolve a sound monitoring mechanism whereby it is ensured that the facility provided by the legislature is not misused at withholding stage. In response to above referred notice, the Deptt submitted that the withholding agents are being monitored as per prevalent system provided under the law. As per the existing provisions of law each withholding agent is duty bound to e-file quarterly withholding tax statement under Section 165(1) of the Ordinance read with Rule 44(4) of the Income tax Rules, 2002. Despite the fact that admittedly no mechanism to adjust taxes deducted under other sections and tax credits exists at present, the Deptt has failed to appreciate the spirit of the instant Own Motion initiative taken by the FTO in the true context of express provisions of substantive law as laid down by the legislature in terms of Section 149 of the Ordinance.