The Punjab government has taken a strong step toward improving tax collection by allowing private companies to deduct income tax directly from employees’ salaries. The Punjab Assembly’s Standing Committee on Excise has approved The Punjab Finance (Amendment) Bill 2025, which now awaits final approval in a formal assembly session.
Once passed, the law will authorize Drawing and Disbursing Officers (DDOs) in private companies to withhold income tax before paying salaries. This move is expected to reduce underreporting of income and tackle tax evasion among salaried professionals in the private sector. It also shifts some responsibility for tax compliance from employees to their employers.
The bill clearly states that if any company fails to deduct the correct tax amount, the local Excise and Taxation Officer will be held accountable for recovering the shortfall. All collected tax will be directly deposited into the provincial treasury, enhancing transparency and efficiency in the system.
The decision was made during a session chaired by Agha Ali Haider and attended by officials from the Excise, Finance, and Law Departments. The government believes this step will broaden the tax base and promote a culture of compliance, especially in sectors that have historically seen low voluntary tax reporting.