The Karachi Tax Bar Association (KTBA) has expressed strong concern over what it describes as major systemic flaws and misapplications within the Federal Board of Revenue’s (FBR) IRIS tax filing system. In a detailed communication to the FBR Chairman, the association argued that these unresolved issues are creating significant hurdles in the filing of income tax returns for the Tax Year 2025, while also raising the risk of unfair tax liabilities for taxpayers.
The KTBA noted that despite repeated engagement, FBR has not taken corrective measures to address anomalies in the system. The association cautioned that inaction could be interpreted either as disregard for genuine taxpayer grievances or as a difference in legal interpretation. It emphasized that taxpayers have a constitutional right to have their liabilities assessed strictly in accordance with law, not through flawed system-generated outcomes.
One of the most pressing issues highlighted by the KTBA involves tax credit on donations under section 60 of the Income Tax Ordinance. According to the association, the IRIS system does not compute tax credit on donations against surcharge payable under section 4AB, a treatment inconsistent with the statutory framework. The KTBA stressed that surcharges under Chapter II must legally be treated as part of “tax,” meaning they should be included when calculating donation-related tax credits.
The association also raised alarm over how the system handles surcharge adjustments against advance tax. Presently, IRIS generates a separate Payment Slip ID (PSID) for surcharge payments rather than offsetting them against advance taxes already paid. The KTBA warned that this practice could result in double taxation, which is contrary to both the spirit and letter of the law.
Further, the tax bar rejected the system’s treatment of additional withholding under section 100BA and the Tenth Schedule as minimum tax. The association argued that excess tax collected under these provisions should not be automatically considered part of the minimum tax liability, since income tax obligations are determined annually and should not be linked to compliance status from the prior year. According to KTBA, such an approach discourages voluntary compliance and undermines trust in the tax system.
The treatment of taxes deducted via electricity bills under section 235 was also highlighted as a major area of concern. The law clearly distinguishes between taxpayers with annual bills not exceeding Rs. 360,000, for whom tax is treated as minimum, and those with higher monthly bills, for whom the tax should be adjustable. However, IRIS currently applies a uniform treatment, categorizing all such deductions as minimum tax. KTBA argued this misinterpretation unfairly denies eligible taxpayers the right to claim adjustments.
The association urged FBR to act swiftly by either correcting the system anomalies in IRIS or issuing clarifications to align practice with statutory provisions. It warned that if left unaddressed, these flaws could erode taxpayer confidence, create unnecessary litigation, and further strain the already complex compliance landscape.
The KTBA concluded that legislative intent is meant to facilitate compliance and broaden the tax net, not to impose additional burdens through technical errors in digital systems. Ensuring fairness, transparency, and consistency in the filing process is essential for both taxpayer trust and effective revenue collection.
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