KARACHI: During currency of investigations, on a teacher’s complaint, FTO has observed that levying 10% withholding tax on teachers for providing their services for paper marking is discriminatory. Due to peculiar nature of job and role in nation building the Teaching Community as a whole deserves kind and compassionate tax treatment; at least non-discriminatory, FTO further added:
Brief facts of the case are that the Complainant being a teacher complained that her withholding tax @ 10% is deducted on the services provided in the shape of marking of examination papers and that this rate is excessive and causes economic sufferings. Further, Sales Tax is also charged on the services provided @ 16% by Punjab Revenue Authority. In response to FTO notice, FBR averred that withholding tax on services is fixed @ 10% by the Parliament of Pakistan. Further withholding tax @16% on services is charged by Punjab Revenue Authority (PRA) and FBR has no jurisdiction over it.
In its findings, FTO has remarked that:
(i) Marking of examination papers constitutes an additional source of income in the hands of teaching community. Though the amount so received is generally meager yet the payers (Education Boards/Universities) being 3rd party, other than employer, the receipt cannot be held as Salary Income.
(ii) FBR’s withholding rates on services u/s 153(1)(b) of Income Tax Ordinance, 2001 create distinction between certain specified services and other services with tax rates ranging from 1.5 % to 10%.
(iii) While FBR provides at least threshold of Rs. 30000, PRA and other provincial tax authorities do not provide such a limit, meaning thereby an unjust taxation prevails on ground.
(iv) Due to its peculiar nature of job and role in nation building the Teaching Community as a whole deserves kind and compassionate tax treatment; at least nondiscriminatory.
(v) In view of above current tax withholding rates on Marking Services is discriminatory and needs to be reviewed by FBR.
While concluding the proceedings FTO has recommended FBR to review the current tax withholding on Marking Services and the same may be rationalized in the following manner:
- By making Marking Services part of specified services having 3% tax rate;
- By increasing the existing basic threshold of Rs 30000 to Rs. 100000/200000 per annum;
iii. By making Marking Services as “Income Tax from Other Sources” u/s 39(1) of Income Tax Ordinance, 2001.
Further, Tax Ombudsman has also requested Punjab Revenue Authority to rationalize the current tax regime on services, by providing some basic annual threshold so as to provide some cushion to the low paid teaching community.