If you are a dedicated government employee working as a full-time teacher, there’s a significant development regarding your income tax. The Federal Board of Revenue (FBR) has recently issued a document that clarifies the tax treatment of income earned by teachers from paper checking or marking duties. This new directive aims to streamline tax deductions and potentially reduce the tax burden on this additional income. Let’s delve into the details of this welcome change.
Understanding the Previous Tax Treatment
Previously, income earned by teachers from paper checking or marking fees was often treated separately from their regular salary for tax deduction purposes. This meant that this additional income was sometimes subjected to a different tax section, specifically Section 153 of the Income Tax Ordinance, which deals with payments for services rendered. As a result, teachers might have faced higher tax deductions on their paper checking fees compared to the tax rate applicable to their overall salary. This discrepancy often led to confusion and a feeling of unfair taxation, especially for teachers with lower basic salaries.
The New FBR Directive: Treating Paper Checking Fees as Part of Salary
The FBR, has now clarified that the tax deducted on the paper checking or marking fees of teachers should be aligned with the tax rate applicable to their salary. This means that this additional income will now be considered as part of their total employment income, and the tax will be calculated accordingly under Section 149 of the Income Tax Ordinance, which specifically deals with the taxation of salary income.
This directive has been communicated to all FBR offices, instructing them to ensure that tax deductions on paper checking fees are consistent with the tax rate on the teacher’s salary. The FBR has also requested feedback on the implementation and outcomes of this directive by March 31st, 2025, indicating an immediate focus on putting this change into effect.
How This Change Benefits Teachers: Examples
To better understand the positive impact of this new directive, let’s consider a couple of examples:
Example 1: Teacher with a Lower Salary
Imagine Mr. A, a full-time government teacher with an annual salary of Rs. 600,000 (Rs. 50,000 per month). According to the existing tax laws, individuals with an annual income up to Rs. 600,000 generally do not face income tax deductions. However, if Mr. A earned an additional Rs. 5,000 during the year for paper checking, this amount might have previously been subjected to a separate tax deduction under Section 153. For instance, if Mr. A was a filer, an 11% tax (Rs. 550) could have been deducted. If he was a non-filer, the deduction could have been as high as 22% (Rs. 1,100).
Under the new FBR directive, this Rs. 5,000 income from paper checking will now be considered part of his overall salary. Since his total income remains within the non-taxable limit, no tax will be deducted on this additional income, leading to a direct saving for Mr. A.
Example 2: Teacher with a Higher Salary
Consider another teacher whose annual salary is Rs. 1,200,000 (Rs. 100,000 per month). Based on the income tax slabs, this teacher would be subject to income tax on their salary under Section 149. Let’s say this teacher also earned Rs. 70,000 from paper checking during the year.
Previously, this Rs. 70,000 could have been taxed separately at 11% (if a filer), resulting in a tax deduction of Rs. 7,700. However, with the new directive, this Rs. 70,000 will be added to their annual salary, bringing their total income to Rs. 1,270,000. While this might slightly increase the overall tax liability based on the applicable tax slab under Section 149, it prevents the application of a potentially higher tax rate or a separate deduction on the paper checking fee. In many cases, especially as income levels rise and tax slabs change, treating this additional income as part of the salary can lead to significant savings compared to separate taxation under Section 153.
The Rationale Behind the Change
The FBR’s decision to treat paper checking fees as part of the salary recognizes the fundamental nature of a teacher’s work. Both teaching in the classroom and evaluating students’ work through paper checking are integral parts of their professional responsibilities and contribute to the same overarching employment contract with the government. By clubbing these incomes together for tax purposes, the FBR is aiming for a more equitable and consistent tax treatment for government teachers.
What Should Teachers Do?
This new directive is a positive step for government teachers. Here’s what you should do:
- Check Your Payslips: Keep a close eye on your salary slips and any separate payments received for paper checking duties. Ensure that the tax deducted on the latter is consistent with the tax rate applicable to your salary.
- Raise Concerns: If you notice that tax is still being deducted from your paper checking fees at a higher rate or separately under a different section, bring this to the attention of your relevant government department and the accounts section. Refer them to the FBR’s directive issued on March 6th, 2025, regarding the tax treatment of teachers’ paper checking fees.
The FBR’s clarification regarding the tax treatment of paper checking fees for government teachers is a welcome relief. By recognizing this income as part of their overall salary, the government is ensuring a fairer and potentially less burdensome tax deduction process. Teachers should stay informed about this change and actively ensure its correct implementation to maximize their financial benefits. This move demonstrates a positive step towards acknowledging the multifaceted roles and responsibilities of educators within the government sector.
