The Federal Tax Ombudsman has recommended the Federal Board of Revenue to fix the minimum income limit for tax exemption from daily-wage earners on the pattern of the salaried class.

A temporary employee of the Pakistan Broadcasting Corporation had filed a complaint with the FTO against deduction of income tax @ 17.5 percent being made on the gross amount without any basic exemption like the one available to the salaried government servants (annual salary less then Rs4 lakh per year is exempt from tax salaried class).

While responding to the FTO, the FBR IR-Policy Wing had informed the FTO that the daily wagers do not fall in the category of salaried persons thus, cannot be categorised 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 percent and for non-filers it is 20 percent.

In his recommendations, the FTO noted that Regular/Ad hoc/Temporary/Daily Wages, all are the different shades and forms of employment and law does not create any distinction among all the above forms, and daily wagers can note be excluded from the ambit of employment.

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

In view of the above, he recommended to the chairman FBR to ensure that low-paid employees of the PBC and other such organisations are not burdened with excessive tax deductions at withholding stage. While taxpayers’ facilitation constitutes the core function of the FBR its implementation on ground should also be visible.

He further directed the concerned RTO to process the instant case on priority basis and under relevant legal provisions, so as to save the complainant from grave hardship he is 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 above recommendation is that low-income daily wagers be treated at par with the salaried persons who avail exemption for income up to Rs400,000 under the present law.

The story was originally published in Business Recorder on February 26, 2022.