FTO rules in favour of school teachers

LAHORE:The Federal Tax Ombudsman (FTO) has ruled in favour of government school teachers, instructing the Federal Board of Revenue (FBR) to cease deducting withholding tax under Section 153 (1) (b) on payments received for supervision, invigilation and paper marking during board examinations.

The decision follows complaints from teachers affiliated with the Board of Intermediate and Secondary Education (BISE) Gujranwala, who argued that these payments should be treated as salary rather than taxable services.

The teachers, employed under the Punjab Education Department, contended that invigilation and paper marking are an extension of their teaching responsibilities and should be taxed under Section 149 of the Income Tax Ordinance, which pertains to salaries.

They highlighted that their participation in examination duties is mandatory and undertaken on directives from the department, with no room for negotiation regarding compensation. Despite this, payments were being taxed as services, leading to financial losses for educators. Following a review, the FTO concluded that the tasks of supervision, invigilation, and marking of papers are integral to the education system and should be classified as part of a teacher’s employment.

The ruling emphasised that teachers perform these duties under the administration’s directives, with predetermined remuneration and that these payments should be considered salary rather than independent services. It also pointed out that many of the affected teachers fall below the taxable income threshold but were still subjected to withholding tax deductions.

In response, the FTO directed the FBR to revise its tax withholding policies and ensure that examination-related payments to teachers are taxed under Section 149. A compliance report detailing corrective measures must be submitted within 60 days.

The ruling marked a significant victory for educators and sets a precedent for fair taxation practices in Pakistan’s education sector. It reinforces the role of the FTO in addressing tax grievances and ensuring adherence to equitable tax policies. With this decision, teachers performing examination duties can now expect a fairer taxation mechanism that aligns with their employment terms.