The government is taking a significant move to assist 1.4 million salaried individuals/pensioners for the tax year 2023 by developing a new simplified salary return or revising the present income tax return form.
FBR Provide Relief to Salaried Individuals
Following orders from the Federal Tax Ombudsman (FTO), the Federal Board of Revenue (FBR) made the decision on Wednesday to provide relief to salaried individuals/pensioners.
An order issued by the FTO office indicated that an investigation was launched on its own initiative into the hardships caused to salaried individuals and retirees by complex tax return formats, while exercising powers granted under Section 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 requested in accordance with the FTO Ordinance and the Federal Ombudsmen Institutional Reforms Act of 2013.
FBR’s Current Method
Indeed, Own Motion has been taken on the problem of hardship caused by the complex nature of online tax filing forms.
many of which are redundant for the category of taxpayers with fixed incomes, including salaried class and pensioners.
As a result, it was discovered that the FBR’s current method of return filing facility suffers from negligence, inattention, and inaptitude, which is directly covered by section 2(3)(ii) of the FTO Ordinance, 2000.
According to the FTO order’s findings, statistical and descriptive analysis revealed that the current format of the tax return for salaried individuals is too complex for an ordinary individual to understand because the prescribed format contains many fields that are irrelevant to a taxpayer whose sole source of income is salary/pension.
When filing a return, such a person must go through all of the fields to fill in the necessary ones.
Furthermore, the so-called simplified form introduced by the software wizard is beyond the comprehension of the average person who is unfamiliar with tax terms and is not computer literate.
Develop a separate wage return
As a result, there is an urgent need to develop a separate wage return in simplified form or to create a separate window in Iris to assist about 1.4 million taxpayers.
The FBR’s current mode of filing tax returns harmed salaried individuals and retirees since the available tax return format was too complex for an average taxpayer to understand and fill out.
It was discovered that a considerable number of the more than 4.2 million taxpayers on the Active Taxpayer List were in the fixed income group, either salaried or pensioners.
The analysis of this segment’s returns data revealed that the tax paid with the returns by a salaried individual was quite negligible.
Because the tax was withheld at the time of salary payment and that income of pensioners was exempt, leaving the remaining source of income to be mostly profit from various savings schemes and profit on debt on bank deposits.
Additional Tax is Payable by Salaried Individuals
While tax is deducted at source from salaried individuals and by banks and NSCs in the case of pensioners, no additional tax is payable by salaried individuals or pensioners at the time of filing return.
Within 30 days, the FTO has asked Members (Policy) and (Information & Technology) to create a new return form and reopen a new window in the existing Iris for salaried-only taxpayers.
The FTO has also directed Member PR to widely publicise the streamlined return filing service for the salaried/pensioner class through media and SMS.
To give a simplified form of returns, a separate tax return for salaried individuals with only the minimum fields related to their source of income is appropriate.
It may be mentioned that such a return can be created utilising historical data of tax returns accessible with PRAL/FBR in respect of individuals with a source of income from Salary/Pension.
Tax Year 2022 returns
It may be added that this is based on data from Tax Year 2022 returns. The number of filers who stated only salary income was 1.3 million.
However, if pensioners are included, the amount may easily exceed 1.4 million filers who will benefit directly from the proposed simplified separate return.
Furthermore, many non-filers may be enticed to submit tax returns by using a simplified form of the tax return, in which case the FBR will benefit directly. As a result, this win-win situation will provide dividends to all stakeholders, according to FTO.
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