The Accountant General Pakistan Revenues has agreed to enhance the “SAP module” following the Federal Tax Ombudsman’s recommendations, aimed at simplifying tax adjustments and credits for salaried individuals and pensioners.

According to a collaboration between the AGPR and the Federal Board of Revenue, taxes would be adjusted against the AGPR’s tax liabilities, providing a more efficient solution for individuals seeking relief.

This move is designed to eliminate the cumbersome refund processes that have long plagued taxpayers, Business Recorder reported.

The FTO stressed the need for the SAP module to be updated to streamline tax procedures. Furthermore, a robust monitoring mechanism is advised to prevent any misuse at the withholding stage.

In a recent meeting led by the AGPR, a proposal to revamp the tax adjustment system for salaried individuals and pensioners was “positively received.” While the AGPR agreed in principle, he emphasised that further discussions would take place in an upcoming internal meeting scheduled for this month.

Key points discussed included the adjustment of taxes up to the AGPR’s tax liabilities, with a request for the Federal Board of Revenue to provide details on the specific sections under which tax deductions can be adjusted.

Implementing such recommendations may require “significant policy decisions” and the AGPR has urged the FBR’s IR (Policy) wing to engage in further correspondence on this matter.

The existing tax withholding procedures at the district account offices (DAO) “are preventing salaried individuals from receiving tax credits,” highlighting the urgent need for reform.

An investigation by the FTO has revealed that salaried individuals are facing excessive tax deductions under Section 149 at the source, despite qualifying for benefits outlined in Clause (2) of Part III of the Second Schedule to the Income Tax Ordinance, 2001.

The FTO’s findings indicated that, although the law explicitly allows for mandatory credit of taxes withheld under different categories, the relevant department has failed to address such concerns “effectively”.

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Moreover, the tax withholding procedures at DAOs do not align with the legislative intent set forth in Section 149 of the Income Tax Ordinance.

The FTO has called on the FBR, AGPR, and the Accountant General of Punjab to implement necessary changes to the SAP module. These updates are expected to enable the adjustment of taxes deducted under various provisions of the Income Tax Ordinance and facilitate timely tax credits for salaried individuals and pensioners, effectively bypassing the lengthy refund process outlined in Section 170.

It has also stressed the need for a robust monitoring mechanism to ensure that the legislative provisions are not misused during the withholding stage.