Tuesday, 28 May 2024

Good news for salaried taxpayers: salary tax adjustments through employer

There is a good news for salaried taxpayers whose salary is taxable. Tax deductions on salary adjustments through employer.

Salaried class employees, should get tax adjustment on there salary from their employers under the Income Tax Ordinance 2001. There is no need for waiting a refund claim from the Federal Board of Revenue (FBR).

Employees can easily get adjustments from their employers and there is no need to wait for a refund. Employees are entitled to a tax adjustment from their employer under the Pakistan tax laws.

Income tax deductions from employees Under Section 149 of the Income Tax Ordinance 2001, will have to be adjusted against advance income tax deductions available under sections 61, 62, 63 and 64 paid during the year. Verification of documentary evidence of tax adjustment is necessary.

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Section 149 – Income Tax Ordinance 2001

Explanation – Section 149 of Income Tax Ordinance, 2001 (Salary Income)

Section 149 Salary. — (1) Every [person responsible for] paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made after making [adjustment of tax withheld from employee under other heads and tax credit admissible under section 61, 62, 63 and 64 during the tax year after obtaining documentary evidence], as may be necessary,

(i) tax withheld from the employee under this Ordinance during the tax year;
(ii) any excess deduction or deficiency arising out of any previous deduction; or
(iii) failure to make deduction during the year

Reasons of non application of adjustment of salary tax deductions

Employers are responsible for deductions of income tax on salary under section 149 of the Income Tax Ordinance. Employers normally do not give benefit to employees of tax deductions from employees under other heads.

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Non Submission of the adjustment claims to their employers is also a big reason. Because employees may not have knowledge of such adjustment of salary tax. Employers internal policies are also hurdle in this adjustment.

Advance taxes available for adjustment against salary tax deductions

Following are the some examples of advance taxes available for adjustment against salary tax deductions by employers.

1     Tax on Cash Withdrawal from Bank               231A

2     Certain Banking Transactions                   231AA

3     Motor Vehicle Registration Fee                 231B(1)

4     Motor Vehicle Transfer Fee                     231B(2)

5     Motor Vehicle Sale                             231B(3)

6     Motor Vehicle Leasing                          231B(1A)

7     Private Vehicle Tax                            234

8     Electricity Bill of Domestic Consumer           235A

9    Telephone Bill                                  236(1)(a)

10    Cellphone Bill                                  236(1)(a)

11    Prepaid Telephone Card                          236(1)(b)

12    Phone Unit                                      236(1)(c)

13    Internet Bill                                   236(1)(d)

14    Prepaid Internet Card                           236(1)(e)

15    Domestic Air Ticket Charges                     236B

16    Sale/Transfer of Immovable Property             236C

17    Functions/Gatherings Charges                    236D

18    Educational Institution Fee                     236I

19    Purchase/Transfer of Immovable Property         236K

20    Purchase of International Air Ticket            236L

21    Banking transactions other than cash            236P

22    Education related expenses remitted abroad      236R

23    Advance tax on general insurance premium        236U

24    Advance tax on life insurance premium           236U

Who can avail adjustment of salary tax deductions against available advance taxes ?

Relief in tax deductions on salary by following employers under the income tax ordinance 2001:

  • Federal Government employees.
  • Provincial Government employees.
  • Autonomous Bodies employees.
  • Private Sector organizations employees.
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