Punjab Tightens Tax Rules With Salary Deductions Now Mandatory at Source

The Punjab government has introduced a key amendment to the Punjab Finance Amendment Bill 2025, making it compulsory for accounts officers in both public and private institutions to deduct income tax from employees’ salaries and deposit it directly into the provincial treasury. Under the revised law, any failure to deduct and deposit the tax will hold the accounts officer personally liable for the unpaid amount. This move is aimed at curbing widespread tax evasion and increasing the province’s revenue. The amendment shifts the responsibility for income tax compliance squarely onto the financial heads of institutions. Officials believe this measure will close longstanding gaps in salary reporting and taxation. Authorities observed that many private-sector employees have been underreporting their income when filing taxes individually, often exploiting inadequate employer disclosures to avoid paying their full dues. This practice has resulted in considerable revenue losses and fostered a culture of systemic tax evasion. To enforce the new rules, the Excise and Taxation Department has been granted the authority to issue recovery notices to those who fail in their responsibilities. In cases of default, the department can recover dues directly from the negligent accounts’ officers. Sources close to the matter describe the amendment as part of a broader initiative to promote transparency in payroll practices and strengthen direct tax collection mechanisms across Punjab.