AGPR, FBR to Facilitate Tax Adjustments and Credits For Salaried Individuals

Accountant General Pakistan Revenues (AGPR) and the Federal Board of Revenue (FBR) have taken a major decision to adjust the withholding tax deducted from salaried individuals, to avoid excessive tax deductions or refund claiming procedures. In this connection, the AGPR will be updating the “SAP module” to facilitate tax adjustments and credits for salaried individuals and pensioners. The Federal Tax Ombudsman (FTO) has recommended that the SAP module be updated to facilitate tax adjustments and credits for salaried- individuals and pensioners, thereby avoiding lengthy refund processes. Additionally, a monitoring mechanism should be established to prevent potential misuse withholding stage. The SAP stands for Systems, Applications, and Products in Data Processing. Taking this into account, a meeting chaired by the Accountant General Pakistan Revenues (AGPR) was held in his office. The AGPR agreed, in principle, with the proposal, however, he said that the same will be discussed in the internal meeting of the AGPR planned during the current month. It was highlighted that tax will be adjusted up to the tax liability of the AGPR and that details of the sections under which tax deducted is adjustable have to be provided by the Federal Board of Revenue. The implementation of the recommendations and further meetings with the office of the AGPR may involve policy-level decisions. The AGPR has requested the FBR that the IR (Policy) wing may make further correspondence on the matter with the AGPR, AGPR added. Presently, the current withholding procedure of tax deduction is in vogue at the District Account Offices (DAO) level, as they are not allowing tax credits to salaried individuals. It was observed during the investigation by the FTO that all of the complainants (salaried individuals) are subjected to excess tax deductions u/s 149 at the stage of deduction at source, despite the fact that they fully qualify for the benefit under Clause (2) of Part Ill of Second Schedule to the Income Tax Ordinance, 2001. The findings of the FTO office revealed that despite the express provision of law regarding withholding tax u/s 149, allowing mandatory credit to tax withheld under other heads during the current period, the department has failed to appreciate the concern raised by this Forum to address the issue and evolve a mechanism to ensure strict adherence to substantive law. It is observed that the current withholding procedure of tax deduction in vogue at the DAO level is not in conformity with the intent of the legislature as laid down under section 149 of the Income Tax Ordinance. FTO had 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 Income Tax Ordinance. The FBR should also evolve a sound monitoring mechanism whereby it is ensured that the facility provided by the legislature is not misused at the withholding stage, the FTO order added.