Excessive deductions: FTO asks FBR to stop taxing hired lecturers

LAHORE: Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah has directed the Federal Board of Revenue (FBR) to stop burdening the hired lecturers at educational institutions with excessive tax deductions at withholding (WHT) stage.

Instead, he said, the field formations of the Board should process cases of hired lecturers under relevant legal provisions to save them from grave hardship being suffered ever since hired by the concerned educational institutions.

According to him, the office of FTO was receiving dozens of complaints every year from the lecturers hired as temporary lecturers at different post graduate colleges across the country. Majority of the complainants are of the view that their salary was not liable to tax but the administrations of their respective institutions were deducting income tax at the rate of 20% out of their salaries. All the lecturers are of the viewpoint that their salary is below the taxable limits for salaried persons.

The FTO pointed out that the field formations of the Board take a stance that the payment made to the lecturers falls under the head of services, which attracts 10% tax deduction against the gross amount payable.

Since most of the lecturers are non-filers and their names were not appearing on the active taxpayer’s list, therefore deduction against their salaries is increased by 100% of the rate specified.

It may be noted that income tax is deducted at the rate of 10% in case of filer and 20% in case of non-filer.

Dr Jah pointed out that the relevant provisions of the income tax law carried an inherent flaw as neither they obligate any valid contract of employment nor place any other condition for a case to be treated as a salaried case except for employer-employee equation based on master-slave relationship.

According to him, the department was not creating any distinction between regular, adhoc, temporary, hired, daily wager employee and follows the criteria of master-slave relationship as a basic parameter for any employment, which is not the spirit of the law. He said the department was treating the hired employees’ wages at par with pay, as it was not ready to exclude them from the ambit of salary deduction.

He asserted that such treatment of the hired lecturers on the part of FBR was against the dictates of law, therefore, excessive tax deductions from the pay/wages of the hired employees of the educational institutions tantamount to maladministration in terms of the FTO Ordinance, 2000.

According to him, the office of FTO termed any such treatment against the hired employees as illegal in the case of employees of Pakistan Broadcasting Corporation. The FBR had also conceded the wrong act being done in such cases while implementing the FTO’s orders in letter and spirit but circulated widely among all the concerned.

Copyright Business Recorder, 2023