The Federal Tax Ombudsman (FTO) has uncovered a systemic issue affecting salaried individuals in Pakistan. District Accounts Offices (DAOs) have reported a lack of clear guidelines from the Federal Board of Revenue (FBR) regarding tax adjustments.
The Problem:
Salaried employees are facing excess tax deductions due to the current system’s inability to account for tax credits and deductions under various provisions of the Income Tax Ordinance, 2001. The automated SAP system used by DAOs is unable to process these adjustments, leading to overpayment of taxes.
FTO Takes Action:
In response to complaints from academic teachers, the FTO investigated the issue and found similar problems across multiple districts. The FTO has directed the FBR, AGPR, and AG Punjab to modify the SAP system to allow for necessary tax adjustments. This will prevent excessive tax deductions and eliminate the need for taxpayers to go through the lengthy refund process.
Full time teachers and medical practitioners are entitled to reduction of tax payable by 25%. 10% medical allowance which is exempt from tax is also taxed and there is no relief for that FTO might want to incorporate that into new update.
The FTO has also emphasized the need for a robust monitoring system to prevent misuse of this new facility.
This development is a significant step towards ensuring fair taxation and protecting the rights of salaried taxpayers in Pakistan.
