A senior taxpayer who receives income from a Behbood or pensioner certificate has petitioned the Federal Tax Ombudsman (FTO) to take action against the Federal Board of Revenue (FBR). The board listed him as "In-Active" on November 1, 2026 while his grievance over an incorrect tax calculation and his request for an extension remained unresolved.

The filing was made by Waheed Shahzad Butt, Chairman of the LTBA Public Interest Litigation Committee, representing A.H. Butt and other pensioners, Behbood Savings Certificate holders and Shuhada Family Welfare Account holders. The respondents include the FBR Chairman, the Member (IR-Operations), the Member (IR-Policy) and the DG IT-DT.

According to clause (6), Part III of the Second Schedule to the Income Tax Ordinance, 2001, the tax on profit from Behbood certificates must not exceed five percent. The complaint notes that the IRIS return software applies this relief via code 9309, yet still levies the ten percent surcharge under section 4AB on the full, unreduced normal tax, effectively recapturing part of the parliamentary relief.

In the example provided, normal tax amounts to Rs. 4,241,199 and the clause (6) reduction is Rs. 796,132. The system imposed a surcharge of Rs. 424,120, whereas the correct surcharge on the reduced tax of Rs. 3,445,067 should be Rs. 344,507. The overcharge is Rs. 79,613, and the correct computation would result in a nil balance payable.

On October 24, 2026, the complainant sent a letter to the FBR Chairman, copying the FTO, highlighting the mistake and attaching the proper calculation. He also filed an extension request before the midnight deadline of October 31.

The FBR neither approved nor denied the request and failed to respond to the letter. On November 1, the online verification system flagged him as "In-Active" and instructed him to submit a return or pay a Rs. 25,000 surcharge to re-enter the Active Taxpayers' List (ATL).

The grievance argues that altering a taxpayer's status while his complaint and extension are pending is arbitrary and neglectful under section 2(3) of the Ordinance. It further claims the taxpayer was not heard and received no reasoned decision, violating Article 10A of the Constitution.

It also asserts that section 4AB applies only to tax imposed under Division I of Part I of the First Schedule, meaning tax already reduced by the Second Schedule is not subject to the normal rate. The complaint maintains that a department cannot punish a citizen for a defect in its own software.

The removal from the ATL, the complaint says, subjects pensioners and Behbood holders to higher withholding rates, banking and property restrictions, and a late-filing surcharge. It characterises the problem as systemic, affecting every taxpayer with such income above Rs. 10 million.

The FTO is requested to:

  • Obtain a report from the FBR.
  • Immediately reinstate the complainant's ATL status without any late-filer penalties, surcharge, default surcharge, or coercive measures.
  • Order correction of the IRIS logic so that section 4AB is not applied to tax reduced under clause (6), allowing a nil-balance filing.
  • Issue a speaking order on the October 24 letter and the extension request.
  • Recommend a public clarification for all affected taxpayers.
  • Recommend action against officials responsible for the delay and heavy-handedness.