The Punjab government has introduced a significant amendment through the Punjab Finance Amendment Bill 2025, placing a direct responsibility on accounts officers in both government and private institutions to deduct income tax from employee salaries and deposit it into the provincial treasury.
Under the newly introduced measure, failure by an accounts officer to ensure the correct tax deduction and timely deposit will result in them being held personally liable for the outstanding tax amount. This stringent step is aimed at tackling tax evasion and bolstering the provincial government’s revenue collection efforts.
The bill’s text explicitly shifts the onus of tax compliance for employee salaries onto the financial heads of institutions. The government believes this will effectively close long-standing gaps in the current salary declaration and taxation systems.
It has been observed that a considerable number of employees, particularly within the private sector, have been underreporting their incomes when filing their taxes independently. This was often facilitated by insufficient or inaccurate income disclosures from employers, leading to substantial revenue losses and fostering systemic tax evasion.
The amendment grants the Excise and Taxation Department the authority to issue recovery orders against accounts officers found to be negligent in their tax deduction duties. The department will have the power to pursue the recovery of any defaulted tax amounts directly from the responsible accounts officers.
Officials familiar with the reform indicate that this move is part of a broader strategy by the provincial government to enhance transparency within payroll systems and improve the collection of direct taxes across Punjab.
The new requirement is expected to have a widespread impact, affecting thousands of institutions across the province. It is likely to necessitate changes in how salaries and deductions are recorded and audited internally. However, experts suggest that for this amendment to be effectively implemented without creating undue administrative burdens, the government must also invest in strengthening the capacity of the relevant departments and establishing robust monitoring mechanisms.
This amendment comes at a critical time for the provincial government, which is reportedly facing pressure to increase its self-generated revenue streams due to reduced federal transfers and rising development expenditures.
