FBR seeks Rs2.217 billion from PIA over unpaid salary withholding tax

The Federal Board of Revenue (FBR) has issued a recovery notice to Pakistan International Airlines (PIA) after the national carrier allegedly deducted more than Rs2.217 billion in income tax from employee salaries but failed to deposit the amount into the national treasury, Business Recorder reported. 

According to details, Regional Tax Office-II served the notice on PIA’s finance department, directing it to immediately deposit the withheld tax collected under Section 149 of the Income Tax Ordinance, 2001.

The liability has been accumulating since July 2025 in violation of Rule 43 of the Income Tax Rules, 2002, which requires the timely deposit of salary withholding tax deducted at source.

Sources said PIA deducted Rs294.9 million in July 2025, Rs293.41 million in August, Rs297.19 million in September, Rs297.097 million in October, Rs317.348 million in November, Rs351.019 million in December and Rs366.512 million in January 2026.

Despite making these deductions, the airline did not deposit the amount into the government treasury, taking the total recoverable amount to Rs2.217 billion.

Under Section 149 of the Income Tax Ordinance, every person responsible for paying salary is required to deduct tax at the time of payment. Section 160 requires the deducted amount to be paid to the Commissioner within the prescribed time and manner.

Sources said PIA’s failure to deposit the tax has triggered proceedings that may extend under Sections 161, 182 and 205 of the Ordinance, which deal with penalties for failure to deduct or deposit withholding tax.

The notice also covers the period from February to June 2026, where deposits either remain unverified or require immediate reconciliation before the close of the financial year 2025-26.

The issue may also affect PIA employees. FBR has separately sent notices to employees, warning that if the deducted tax is not deposited, they will not be able to claim it in their Tax Year 2026 returns.

Affected employees may also be excluded from the Active Taxpayers List and treated as non-filers, despite income tax being deducted from their monthly salaries.

To resolve the matter, RTO-II has asked PIA employees to submit copies of salary slips showing gross salary, taxable salary and tax deducted within seven days.

FBR has warned that non-deposit or non-verification of salary withholding tax may create mismatches in taxpayer records, delay tax credit and refund claims, and lead to litigation.

PIA has not yet responded to the notice.