The government is taking a big step to facilitate 1.4 million salaried individuals/pensioners for the tax year 2023 by introducing a separate salary return in simplified form or revision of the existing income tax return form.
The Federal Board of Revenue (FBR) took the decision on Wednesday following directives of the Federal Tax Ombudsman (FTO) providing relief to the salaried individuals/pensioners.
An order of the FTO office revealed that 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 the Federal Ombudsmen Institutional Reforms Act, 2013.
In fact, Own Motion has been taken upon the issue of hardship created by the complex nature of online processes for tax filing forms many of which are redundant for the category of taxpayers of fixed income groups including salaried class and pensioners.
Therefore, it was found that the current mode of return filing facility provided by the FBR is suffering from neglect, inattention and inaptitude which is squarely covered under section 2(3)(ii) of the FTO Ordinance, 2000.
According to the findings of the FTO order, the statistical and descriptive analysis revealed that the present format of the 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 a 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 the 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 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 the 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 a salaried individual was quite negligible because the tax was withheld at the time of payment of salary and that income of pensioners 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, 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 form and also reopen a new window in the existing Iris for the 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 a simplified version of returns it is, therefore, befitting to devise a separate tax return for salaried individuals having only minimum fields relevant to their 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 a 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 1.3 million.
However, if pensioners may also be included the figure may safely cross 1.4 million filers who will be direct beneficiaries 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, FBR will be the direct beneficiary. Thus, this win-win situation will bring in dividends for all the stakeholders, FTO added.
