Pvt entities unlawfully deducting extra tax from salary before budget passage [ Tritiyo Matra News ]

Pvt entities unlawfully deducting extra tax from salary before budget passage

Local June 21, 2016

Many of the private employers are allegedly deducting additional amount of income tax at source from the employees’ salary in June following a tax measure of the proposed Finance Bill 2016 causing violation of the law.
Private companies, multinational companies, banks, non-bank financial institutions and other organistaions are deducting the tax at higher amount to adjust the additional tax burden derived due to proposed reduction in tax rebate facility in the budget, employees said.
They said that sudden tax deduction at source at higher amount from salary just ahead of Eid Ul Fitr created tremendous financial pressure on them as they might face a shortfall in budget for celebration of the biggest festival of the Muslims.
The government in the finance bill proposed a reduction in investment ceiling to 20 per cent of total income for getting income tax rebate from the current 30 per cent through amending the income tax law creating higher income tax liability for individual taxpayers in the next fiscal year.
The government also revised the rates of income tax rebate ranging from 10 per cent to 15 per cent from the current 15 per cent.
Officials of the National Board of Revenue said that tax deduction at higher rate was unlawful as the finance bill has yet to be approved by parliament.
Income tax provisions of the finance bill become effective from July 1 after getting approval of the parliament.
The finance bill 2016 is scheduled to be approved by the parliament on June 29.
They said that though the provisions of finance bill related to the income tax became retrospectively effective for the previous income year, employers could not deduct the tax in line with the proposed bill as it is yet to become a law.
Taxpayers will have to follow the amended income tax law for paying income tax for the fiscal year 2016-17 on the income of previous year 2015-16 but employers should follow the existing law under which tax rebate will be applicable on 30 per cent investment of total income, they said.
What if the proposed provision related to investment rebate is changed while the finance bill is passed? They raised the question.
Officials of the income tax wing of the NBR were also seeking explanations from the employers why they are deducting the tax in line with the proposed tax measures.
Employees from private companies, banks and MNCs said that employers had cut a big portion of their salaries as tax at source.
The reduced payment will make the celebration of Eid tough, they said.
They said that they would also face complexities in getting refund if the rate of investment is finally increased by the parliament during approval of the budget.
High officials of some banks and private companies told New Age that they started deducting the tax at higher amount to adjust the tax liability which will increase due to reduction in investment rebate as they deducted the tax at lower amount in last 11 months in line with higher investment rebate at 30 per cent.
They are deducting the tax apprehending that they will have to face harassment in future by the tax officials who will later make them liable for not deducting it.
The income tax measures are also applied with retrospective effect, they said.
NBR officials, however, said that individual taxpayers, not employers, would become liable for additional tax amount if derived due to reduction of rebate facility.
According to the Income Tax Ordinance-1984, employers are responsible to deduct tax at source, while making the payment to an employee, on an average rate applicable for the total amount paid to the employee as salary and deposit to the government exchequer.
Taxpayer also has to pay advance tax if his or her annual income crosses Tk 4 lakh.