ISLAMABAD: On the recommendations of the Federal Tax Ombudsman (FTO), the Federal Board of Revenue (FBR) is expected to make changes in the income tax return form or introduce a separate salary return form in simplified form to facilitate 1.4 million salaried individuals/pensioners for Tax Year 2023.

An own motion investigation was initiated on hardships caused to salaried individuals and pensioners by complex tax return format while exercising powers conferred u/s 9 (1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance).

The comments of the Secretary, Revenue Division, Member (Policy) and Member (Information & Technology) were requisitioned under the FTO Ordinance read with Federal Ombudsmen Institutional Reforms Act, 2013.

FBR issues increased income tax slabs for salaried class

According to the findings of the FTO order, the statistical and descriptive analysis revealed that present format of tax return for salaried individuals is too complex for an ordinary individual to understand as the prescribed format contains many fields which are not relevant to a taxpayer whose only source of income is salary/pension.

While filing return such a person has to unnecessarily go through all the fields to fill-up the relevant fields. Besides, the so called simplified form introduced through software wizard is also beyond comprehension of an ordinary individual who is neither familiar with tax terminology and nor is he computer literate.

Therefore, there is a dire need to devise a separate salary return in simplified form or provide a separate window in Iris to facilitate about 1.4 million taxpayers.

The FBR’s current mode for filing of tax returns caused hardships to salaried individuals and pensioners as the available tax return format was too complex for an average taxpayer to understand and fill out the tax return.

It was observed that out of more than 4.2 million taxpayers on Active Taxpayer List, a large number of active filers fell in the category of fixed income group, being either salaried class or pensioners.

Returns data analysis of this segment suggested that tax paid with the returns by salaried individual was quite negligible because tax was withheld at the time of payment of salary and that income of pensioner being exempt, the remaining source of income was mostly profit from different savings schemes and profit of debt on bank deposits.

It is evident that while tax is deducted at source from salaried individuals and by Banks & NSCs in the cases of pensioners, hence no further payment of tax is payable by the salaried individuals and pensioners at the time of filing return.

The FTO has directed Member (Policy) and Member (Information & Technology) to devise a new return from and also reopen new window in existing Iris for salaried only taxpayer within 30 days.

The FTO has also directed Member PR to widely publicize the said streamlined return filing facility for awareness through media and SMS for the salaried/pensioner class.

In order to provide simplified version of returns it is, therefore, befitting to devise a separate tax return for salaried individuals having only minimum fields relevant to his source of income.

It may be stated that such a return can be generated through Artificial Intelligence (Al) using historical data of tax returns available with PRAL/FBR in respect of persons having source of income from Salary/Pension.

It may be further stated that as per data of returns for Tax Year 2022. The number of filers who declared income from only salary stood at 1.3million. However, if pensioners may also be included the figure may safely cross 1.4 million filers who will be direct beneficiary from the suggested simplified separate return.

In addition, many non-filers may be tempted to file tax returns by availing simplified version of tax return and in such a situation the FBR will be the direct beneficiary. Thus, this win-win situation will bring in dividends for all the stakeholders, the FTO added.

Copyright Business Recorder, 2023