FTO Recommends Adjustment of Tax Deducted Under Income Tax Ordinance

Federal Tax Ombudsman (FTO) has recommended Federal Board of Revenue (FBR), Accountant General of Pakistan Revenue (AGPR) and Accountant General Sindh to allow adjustment of tax deducted under various provisions of the Income Tax Ordinance and tax credits to the salaried individuals/pensioners. This is an own motion investigation initiated while exercising powers conferred u/s 9(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) to investigate lack of symmetry committed by the FBR’s formations in excess tax deductions and subsequent ordeal faced by the salaried taxpayers by not implementing legal facility of adjustment of adjustable taxes withheld from them and tax credits admissible to them, FTO added. According to the FTO’s recommendations to the FBR, the FBR, AGPR and AG, Sindh should 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 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 withholding stage. The FTO explained that the basic intent and rational behind invoking Own Motion powers in this case was to oversee implementation of explicit provisions of the statute and the proactive approach of the Deptt in facilitating wide strata of salaried taxpayers who are in receipt of fixed income and yet have to undergo extensive cobweb of inattention and as a consequence are deprived of their legal rights. The response submitted by the District Account Officers unequivocally suggest that they had no knowledge of the legal facility of adjustment of adjustable taxes withheld and tax credits admissible to salaried taxpayers. A certain mechanical procedure is in place called SAP and the Withholding Agents are at liberty for incorporating in their system whatever they desire and miss out other legal tax credits available to the salaried taxpayers thereby enhancing their agony and shrinking their already compressed fixed monthly income. However after issuance of this notice, the Commissioner Withholding Taxes Zone. RTO Sukkur vide letter dated 30.05.2024 issued necessary instruction to the District Accounts Offices at Sukkur, Ghotki, Khairpur Larkana, Kamber Shahdadkot, Shikarpur and Jacobabad for adjustment towards tax withheld from employees under “Other head” and tax credit admissible under section6l & 63 of ITO, 2001 after obtaining documentary evidence. It is high time that the FBR should devise a plan and mechanism to legally assist this most documented class of taxpayers and lessen their month after month hardship in the form of reduced salary and subsequent non-existent trust in the Deptt and the overall governance structure. Non-paying any attention to this otherwise very important human aspect constitute maladministration as defined u/s 2(3) of the FTO Ordinance, 2000. Despite the fact that admittedly no mechanism to adjust taxes deducted under other sections and tax credits exists at present, the Deptt has failed to appreciate the spirit of the instant Own Motion initiative taken by the FTO in the true context of express provisions of substantive law as laid down by the legislature in terms of Section 149 of the Ordinance, FTO maintained. It is obvious that in this regard no instructions, whatsoever were issued earlier by RTO Sukkur. It is only after initiation of this own motion, the Deptt woke up from slumber and the Commissioner Withholding Taxes Zone, RTO Sukkur vide letter dated 30.05.2024 issued necessary instruction to the District Accounts Offices at Sukkur, Ghotki, Khairpur, Larkana, Kamber Shahdadkot, Shikarpur and Jacobabad for adjustment towards tax withheld from employees under “Other head” and tax credit admissible under section 61 & 63 of ITO, 2001 after obtaining documentary evidence, FTO added.