Pakistan Business Council Flags Tax Credit Calculation Error in FBR’s IRIS System

The Pakistan Business Council (PBC) has called on the Federal Board of Revenue (FBR) to urgently address a significant error in its IRIS tax filing system, which is causing delays for taxpayers seeking credits for charitable donations and pension fund contributions. In a letter dated October 8, 2025, addressed to FBR Chairman Rashid Mahmood Langrial, the PBC highlighted that the IRIS system is failing to correctly compute tax credits under Sections 61 and 63 of the Income Tax Ordinance, 2001. The issue affects highly skilled employees, generous donors, and active investors in voluntary pension funds, according to the PBC. The council explained that the problem stems from the system’s exclusion of the surcharge introduced under Section 4AB of the Finance Act 2024 when calculating tax credits. The surcharge, set at 10% of income tax for individuals and associations with taxable income exceeding Rs. 10 million, is defined as “tax” under the law. However, the IRIS system does not include this surcharge in the total taxable income when computing credits, contrary to the clear language of the law. “This discrepancy is causing delays in the filing of income tax returns,” the PBC wrote, urging the FBR and its IT arm, PRAL, to rectify the issue and ensure compliance with the law. The council emphasized that both the law and relevant sections require tax credits to be calculated on the full amount, including the surcharge. The letter was also copied to Finance Minister Muhammad Aurangzeb, Minister of State for Finance Bilal Azhar Kayani, and SAPM on Industries and Production Haroon Akhtar Khan. The PBC called for immediate action to resolve the issue, warning that continued delays could undermine taxpayer confidence and disrupt the timely filing of returns.