Tax-collection authority is expected to notify categories of persons who will be affected
June 11, 2025 : In a decisive step to expand Pakistan’s tax base and crack down on unaccounted wealth, the Federal Board of Revenue (FBR) has unveiled a series of stringent restrictions in the Finance Bill 2025–26, targeting individuals and entities operating outside the formal tax system.
At the heart of the reform is the proposed Section 114C of the Income Tax Ordinance, 2001, which seeks to bar “ineligible persons” — including non-filers and those unable to justify their financial means — from engaging in major economic transactions. This includes the purchase, booking, or registration of immovable property, vehicles, and securities.
Only those who have filed income tax returns for the immediately preceding tax year and can prove sufficient declared resources will be allowed to conduct such high-value transactions.
To enforce this framework, the government may notify specific thresholds above which these restrictions will apply. Affected individuals may also face a ban on opening or maintaining bank accounts, with limited exceptions such as Asaan and Pensioner Accounts.
Data-Driven Enforcement
To strengthen enforcement, the FBR has also proposed Section 175AA, empowering it to share tax data of high-risk individuals with scheduled banks. The information to be shared includes:
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Income and turnover data for multiple years
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Wealth statements and financial disclosures
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Identification information, including bank account numbers
Banks will be required to cross-match this data with their own records and flag discrepancies. If a person’s banking footprint does not align with declared tax data, financial institutions will be obligated to report it.
Crackdown on Unregistered Individuals
In a further tightening of the noose, the FBR is proposing Section 14AC, which authorizes tax commissioners to instruct banks to suspend account operations for individuals who fail to register under tax laws.
Additionally, no application for property or vehicle registration will be processed for non-filers or ineligible persons once a transaction value threshold is notified by the federal government.
Entities such as vehicle manufacturers, Excise Departments, mutual fund managers, and brokers will be legally barred from conducting business with such individuals or associations unless they are compliant with the new provisions.
The FBR also plans to deploy data algorithms to flag mismatches and anomalies across financial activity, targeting the country’s massive undocumented economy — estimated to exceed Rs9.4 trillion.
The Finance Bill aims to instill fiscal discipline and align Pakistan’s economy with global standards by ensuring only tax-compliant individuals can access the formal financial and property markets.
Analysts view these steps as some of the most aggressive yet in Pakistan’s efforts to digitize, document, and discipline its tax ecosystem. However, the success of these measures will hinge on the timely issuance of notifications and robust implementation by tax authorities and financial institutions alike.
