ISLAMABAD: A senior citizen taxpayer deriving income from bahbood/pensioner certificate was declared “In-Active” on November 1, 2026 by the Federal Board of Revenue (FBR) forcing the taxpayer to approach the forum of Federal Tax Ombudsman (FTO) for justice.
The Federal Tax Ombudsman (FTO) has been asked to take cognizance of maladministration by the Federal Board of Revenue (FBR). The complaint alleges that a senior citizen taxpayer deriving income from Behbood/pensioner certificate was declared “In-Active” on 1 November 2026, even though his complaint regarding wrong tax computation and extension application were pending.
The complaint was filed by Waheed Shahzad Butt, Chairman of the LTBA Public Interest Litigation Committee, acts on behalf of A.H. Butt and similarly placed pensioners, Behbood Savings Certificate holders and Shuhada Family Welfare Account holders. The respondents are the Chairman FBR, Member (IR-Operations), Member (IR-Policy) and the DG IT-DT.
Under clause (6), Part III of the Second Schedule to the Income Tax Ordinance, 2001, tax on profit from Behbood certificates cannot exceed 5 percent. The complaint says the IRIS return software applies this relief through code 9309 but then charges the 10 percent surcharge under section 4AB on the full, unreduced normal tax. In its words, this takes back part of the relief granted by Parliament.
In the illustrative computation, normal tax was Rs. 4,241,199 and the clause (6) reduction was Rs. 796,132. The system charged a surcharge of Rs. 424,120, whereas the lawful surcharge on the reduced tax of Rs. 3,445,067 is Rs. 344,507. The excess is Rs. 79,613, and on the correct computation the balance payable is nil.
On 24 October 2026, the complainant wrote to the Chairman FBR, with a copy to the FTO, pointing out the error and giving the correct computation. Before midnight on 31 October, the due date, he also applied for an extension of time. FBR neither accepted nor rejected the application, and it did not reply to the letter. On 1 November, the FBR online verification system showed him as “In-Active” and asked him to file the return or pay a Rs. 25,000 surcharge for inclusion in the Active Taxpayers’ List (ATL).
The complaint argues that changing a taxpayer’s status while his complaint and extension request are undecided is arbitrary and an inattentive decision under section 2(3) of the Ordinance. The taxpayer was not heard and received no reasoned decision, contrary to Article 10A of the Constitution. Section 4AB applies to tax imposed under Division I of Part I of the First Schedule, so tax already reduced by the Second Schedule is not tax at the normal rate. A department cannot penalize a citizen for its own software defect.
The complaint also says that removal from the ATL exposes pensioners and Behbood holders to higher withholding rates, banking and property restrictions, and a late-filing surcharge. It calls the issue systemic, since every taxpayer with such income above Rs. 10 million is affected.
The FTO has been asked to call a report from FBR. Direct immediate restoration of the complainant’s ATL status, with no late-filer treatment, surcharge, default surcharge, penalty or coercive action. Direct correction of the IRIS logic so that section 4AB is not charged on tax reduced under clause (6), and the return can be filed with a nil balance. Direct a speaking order on the 24 October letter and the extension application. Recommend a public clarification for all affected taxpayers. Recommend action against the officials responsible for the delay and highhandedness.
Copyright Business Recorder, 2026
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