The Federal Board of Revenue (FBR) has come under criticism for issuing what are being described as illegal tax notices to hundreds of salaried individuals across Pakistan. The Karachi Tax Bar Association (KTBA) has raised concerns in a letter to Dr. Hamid Ateeq Sarwar, Member (Inland Revenue – Operations), urging immediate withdrawal of these notices.

The notices, issued under Section 162 of the Income Tax Ordinance, allege that salaried individuals claimed higher income tax credits in their returns than what was actually deducted and deposited by their employers. However, the KTBA argues that these notices are being sent in cases where tax officers are either unable to verify the deductions through the IRIS MIS system or are unable to recover withheld taxes from employers, who are the withholding agents in this scenario.

The KTBA emphasized that employees file their tax returns based on salary certificates issued by their employers, as per Rule 41 of the Income Tax Rules, 2002. These certificates include details of income tax withheld and deposited by the employer. Any discrepancies or shortfalls in tax payments, the KTBA argues, should be addressed with the employer, not the employee.

The association further clarified that Section 162 of the Ordinance allows tax officers to issue notices to employees only if their employers fail to deduct or collect income tax under Section 149. In this case, the KTBA asserts, income tax has been duly withheld by employers, and the salary certificates provided to employees reflect this.

The KTBA highlighted the plight of salaried individuals, who already bear the highest tax rates in the country on their gross income without deductions or exemptions. The issuance of these notices, it said, adds unnecessary distress to an already overburdened segment of taxpayers.

The KTBA has requested the FBR to issue instructions to its field offices in Karachi to immediately withdraw these notices and ensure compliance with the law. The association has called for legal and administrative redress to resolve the issue and prevent further distress to salaried taxpayers.

The controversy has sparked debate over the FBR’s approach to tax collection and its impact on salaried individuals, who are often seen as the most compliant segment of taxpayers in Pakistan.