The Punjab government has introduced a major reform through the Punjab Finance Amendment Bill 2025, mandating accounts officers in both public and private institutions to deduct income tax directly from employees’ salaries and deposit it into the provincial treasury. The bold move shifts the burden of tax compliance from individual employees to the financial heads of institutions.
Under the amendment, accounts officers will now be held personally liable for any failure to deduct or deposit the required taxes. The aim is to curb longstanding issues of income underreporting and systemic tax evasion, particularly prevalent in the private sector where employer disclosures were often incomplete or inaccurate.
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The provincial Excise and Taxation Department has been granted authority to issue recovery notices to negligent officers, making them financially accountable for defaults. This provision is expected to not only boost provincial revenues but also enhance transparency and accountability in payroll and taxation systems.
Officials say the measure is part of a wider strategy to modernize tax administration and improve direct tax collection amid fiscal pressures caused by reduced federal transfers and growing development demands. The reform will affect thousands of institutions and could significantly reshape payroll operations across Punjab.
While the move has been welcomed for its revenue potential, tax experts warn that successful implementation will require investment in institutional training, compliance monitoring, and user-friendly digital systems to avoid overwhelming employers with administrative challenges.
