LAHORE The Federal Tax Ombudsman (FTO) has ruled that the Federal Board of Revenue (FBR) was incorrectly applying a higher withholding tax on payments made to teachers for examination-related duties, directing the tax authority to ensure such payments are taxed under salary provisions instead.
According to the FTO’s decision, the FBR had been deducting tax under Section 153(1)(b) of the Income Tax Ordinance, 2001, on remuneration paid to teachers for services such as examination invigilation, paper marking, and other examination duties. Section 153 generally applies to payments for services and often results in higher withholding tax deductions.
The FTO held that teachers performing examination duties remain “on duty” as employees during the examination process. Therefore, any remuneration paid by educational boards, including the Board of Intermediate and Secondary Education (BISE) Sargodha and other examination boards, should be treated as part of their salary income rather than as payment for independent services.
As a result, the Ombudsman ruled that tax on such payments should be deducted under Section 149, which governs withholding tax on salary, instead of Section 153.
FTO Directs FBR to Issue Immediate Instructions
In its recommendations, Federal Tax Ombudsman instructed the FBR to ensure immediate compliance with the ruling.
The Ombudsman directed the Commissioner Inland Revenue (Withholding), Sargodha, to issue instructions to all withholding agents and education authorities that remuneration paid to teachers for examination duties must be subjected only to Section 149 (Salary Tax).
The FBR has also been directed to implement the recommendations and submit a compliance report within 30 days.
Relief for Teachers
The ruling is expected to provide significant relief to thousands of teachers engaged in board examination duties, including invigilation, paper marking, and other examination-related assignments.
With the implementation of the FTO’s directions, teachers will no longer face higher tax deductions under Section 153 on examination duty payments. Instead, only the applicable tax under the salary taxation regime will be withheld, reducing excessive deductions from their examination remuneration.
