Lahore: District Accounts Offices (DAOs) have told the Federal Tax Ombudsman (FTO) that the Federal Board of Revenue (FBR) has never given any guidelines or instructions about adjusting taxes withheld from salaried persons.
The FTO office found during its investigation that salaried persons often face excessive tax deductions under Section 149 at the source, even though they qualify for benefits under Clause (2) of Part III of the Second Schedule to the Income Tax Ordinance, 2001.
All DAOs agree that taxes are withheld using an automated SAP system, which calculates monthly deductions based on an average rate. Final adjustments are made in June each year. This SAP system is configured by AGPR and FBR and is used by the AG Punjab. Therefore, DAOs cannot adjust the taxes even if salaried individuals provide details of other tax deductions under different sections of the Ordinance.
The FTO had requested information from DAOs in Multan, Khanewal, Muzaffargarh, D.G. Khan, Layyah, and Rajanpur due to complaints from teachers about excessive tax deductions and the difficulties they face.
The FTO’s order noted that the current tax withholding procedure at DAOs does not align with the legislative intent under Section 149 of the Ordinance. The FTO has directed the FBR, AGPR, and AG Punjab to modify the SAP system to allow adjustments for various tax deductions and credits, ensuring timely credit for salaried individuals and pensioners. This change aims to avoid the lengthy refund process outlined in Section 170 of the Ordinance. Additionally, the FBR is required to develop a monitoring system to prevent misuse of this facility at the withholding stage.
