Deduction of tax from daily wagers: FTO for fixing minimum income limit

LAHORE: The federal tax ombudsman has ruled that the minimum income limit should be set for deducting tax from the daily wage earner semi-government employees like the government employees.

The FTO gave the judgment after initiating an inquiry into a complaint filed by a temporary employee of the Pakistan Broadcasting Corporation (PBC), contesting that 17.5 per cent income tax deduction on his daily salary was being made on the total amount without any basic exemption while the salaried government employees having up to Rs 4 lakh per annum salary are exempted from income tax.

While responding to the FTO, the FBR IR-Policy Wing had informed that the daily wagers do not fall in the category of salaried persons. Thus they cannot be categorized as exempt employees. The rate of tax for such contract-services employees has to be deducted u/s 153(1)(b) of the Ordinance that is 10% and for non-filers it is 20%.

In his recommendations, the FTO noted that regular/ad hoc/temporary/daily wages, all are the different shades and forms of employment and the law doesn't create any distinction among all the forms, and daily wagers cannot be excluded from the ambit of employment.

In the findings, he held that the FBR's treatment of the instant case u/s 153(1)(b) is against the dictates of the law and excessive tax deductions from the pay/wages of a low-paid temporary employee of the PBC is tantamount to maladministration in terms of the FTO Ordinance 2000.

The FTO directed the FBR chairman to ensure that the low-paid employees of the PBC and other such organizations are not burdened with excessive tax deductions at withholding stage. While taxpayers facilitation constitutes the core function of the FBR, its implementation on the ground should also be visible. He directed the RTO concerned to process the instant case on a priority basis and under relevant legal provisions so as to save the complainant from grave hardship he has been suffering since 2017. He desired that the FBR should issue necessary clarification for all and sundry so as to safeguard the low-paid employees against excessive deductions.

The purpose of the recommendation is that the low income daily wagers be treated on a par with salaried persons who avail exemption for income upto Rs 400,000 under the present law.