Tax Notices Issued Despite Legal Concerns, Creating Unnecessary Burden on Employees

KARACHI: The Federal Board of Revenue (FBR) has begun issuing notices to salaried individuals, accusing them of claiming tax credits on income tax deductions in their returns. The Karachi Tax Bar Association (KTBA) has raised concerns over this move, calling it unjustified and legally questionable.

In a letter addressed to the Member IR Operations, the KTBA highlighted that hundreds of such notices have been sent, questioning discrepancies in reported tax deductions. The issue reportedly arises when tax officers are unable to verify the deductions through the IRIS Management Information System or recover withheld tax amounts from employers.

Legal and Procedural Concerns

The KTBA clarified that salaried individuals file their tax returns based on salary certificates issued by their employers, as per Rule 41 of the Income Tax Rules, 2002. Any shortfall or miscalculation in tax payments should be addressed with the employer, who acts as the withholding agent, rather than targeting individual employees.

Citing legal provisions, the association argued that section 162 only allows tax officers to issue notices to employees if their employers failed to deduct tax under section 149. Since that is not the case here, the KTBA asserted that the notices lack legal jurisdiction.

Unfair Taxation Burden on Salaried Class

The KTBA further emphasized that salaried individuals already bear the highest tax burden in Pakistan, with taxes deducted at the source on their gross income without exemptions. These unexpected notices are causing unnecessary stress and financial uncertainty for employees.

Call for Immediate Action

Urging immediate withdrawal of these notices, the KTBA requested the FBR to direct its field formations in Karachi to adhere to legal procedures and prevent undue harassment of salaried taxpayers.