Based on the available sources, the House Rent Subsidy (HRS) tax deduction certificate should be issued in the employee’s name. Here’s why:
Nature of House Rent Subsidy (HRS) as Employee's Income:
- The Income Tax Ordinance, 2001, considers any benefit or perquisite provided by an employer to an employee, whether convertible into money or not, as chargeable to tax under the head "Salary".
- Specifically, Section 13(12) of the Ordinance states that if accommodation or housing is provided by an employer to an employee in a tax year, the amount chargeable to tax to the employee under the head "Salary" for that year shall include an amount computed as prescribed.
- Income Tax Rule 4, under "PART-I: SALARY," clarifies that "the value of all perquisites, allowances and benefits provided by the employer to the employee shall be included in the said income in accordance with the rules 4 to 7". This indicates that HRS, as a benefit related to accommodation, is part of the employee's taxable salary income.
Tax Deduction under Section 149:
- Section 149(1) of the Income Tax Ordinance, 2001, mandates that "Every person responsible for paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made".
- This clearly indicates that the tax is deducted from the employee's salary, making the employee the taxpayer for this income component.
Issuance of Tax Deduction Certificate:
- Section 164(1) of the Income Tax Ordinance, 2001, states that "Every person collecting tax... or deducting tax from a payment... shall furnish a certificate of collection or deduction of tax to the person from whom the tax has been collected or deducted".
- Income Tax Rule 42, concerning the certificate of collection or deduction of tax, also indicates that such a certificate is issued to the "taxpayer" from whom the tax was collected or deducted.
- Since the tax on the HRS (as part of salary) is deducted from the employee's income, the certificate should be issued to the employee.
Relevance of Spouse's Ownership and Power of Attorney:
- The fact that the house is owned by the spouse means that any rental income received by the spouse from a tenant would be the spouse's "Income from Property". However, the HRS is a payment from the employer to the employee as a benefit of employment, not rent from the spouse.
- Holding a Power of Attorney from the spouse typically allows the employee to act on behalf of the spouse for legal or financial matters, including tax filings related to the spouse's income or property (as described in Income Tax Rules 73(6) and 76F concerning authorized representatives). It does not, however, transfer the primary tax liability for the employee's own salary and perquisites to the spouse. The income (HRS) is fundamentally derived by the employee from their employment.
Therefore, the tax deduction certificate for House Rent Subsidy (HRS) should be issued in the employee’s name because it is a component of their salary income, and the tax is deducted from their payment. While the sources do not provide a specific FBR rule or SRO directly addressing this exact scenario (HRS for spouse-owned house with Power of Attorney), the general principles for salary taxation and withholding certificates consistently support this conclusion.
