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.
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.
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.