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The Pakistan Business Council (PBC) has raised concerns over a major technical error in the Federal Board of Revenue’s (FBR) IRIS system, which has affected the calculation of tax credits for the tax year 2025.
According to PBC, the issue impacts highly skilled professionals and high taxpayers working for member companies. Many of these individuals are active contributors to charitable organizations and investors in voluntary pension funds. The council has requested the government’s intervention to direct both FBR and PRAL to resolve the matter.
The problem, as highlighted by PBC, lies in the incorrect computation of tax credits for charitable donations under Section 61 and contributions to approved pension funds under Section 63 of the Income Tax Ordinance, 2001. The system reportedly fails to apply the credits according to the legal provisions, causing delays in filing tax returns.
PBC further pointed out that the Finance Act 2024 introduced a new surcharge under Section 4AB of the same ordinance. The surcharge, set at 10% of income tax, applies to individuals and associations of persons with taxable income exceeding Rs. 10 million.
The law defines “tax” under Section 2(63) to include any tax imposed under Chapter II, which means the surcharge under Section 4AB should be considered part of the total tax. Section 149 also supports this interpretation, as it explicitly mentions “tax under Section 4AB” while referring to advance income tax deductions from salaries.
Despite these legal references, the IRIS system currently excludes the surcharge while calculating tax credits under Sections 61 and 63. PBC argues that since both sections base the credit on the total tax assessed, the surcharge must be included in the calculation.
The council has urged the authorities to ensure that the system complies with the law. It requested FBR and PRAL to immediately correct the anomaly to prevent further complications in the ongoing tax filing process.
