FBR proposes ban on key transactions by non-filers

• Move aims to broaden tax net and curbing undocumented wealth.
• FBR considering ban on "ineligible persons" from opening bank accounts.
• Tax body to use data-based algorithms to identify discrepancies.
  

ISLAMABAD: In a significant move aimed at broadening the tax net and curbing undocumented wealth, the Federal Board of Revenue (FBR) has introduced stringent new measures within the proposed Finance Bill 2025-26. 

These measures seek to prohibit "ineligible persons" from engaging in high-value economic transactions, including the purchase of immovable property, vehicles, and securities, The News reported.

The core of this initiative lies in the newly inserted Section 114C of the Income Tax Ordinance, 2001. This section establishes a framework that will restrict individuals and entities who have not filed their income tax returns, or who cannot adequately justify their financial capacity through formally declared resources, from participating in major economic activities. 

This means that only those who have filed their income tax return for the immediately preceding tax year and possess sufficient declared resources, will be able to make such significant purchases. 

The tax-collection body is expected to notify categories of persons who will be affected, and restrictions on opening and maintaining bank accounts for such individuals are also being considered.

Furthermore, a critical new provision, Section 175AA, is proposed to be inserted into the Income Tax Ordinance, 2001. This empowers the FBR to share tax-related information of "high-risk persons" directly with scheduled banks across Pakistan.

This includes a comprehensive range of data such as turnover, income (both declared and taxable) for multiple tax years, identification data (including bank account numbers) as declared in income tax returns, wealth statements, financial statements, and any other relevant documents submitted to the FBR. 

The FBR plans to utilise data-based algorithms to identify discrepancies and share this information with banks. Banks, in turn, will be obligated to provide particulars of persons whose banking information varies from the FBR's data.

In another drastic measure, the FBR proposed Section 14AC to bar operations of bank accounts. The commissioner shall have the powers to direct banking companies to bar operation of bank account of any person, who fails to get registered under the tax laws.

The Finance Bill states any application, by any ineligible person, for booking, purchase or registration of a motor vehicle, shall not be accepted or processed by any manufacturer of a motor vehicle or vehicle registering authority of Excise and Taxation Department, as the case may be: Authorities won’t accept or process applications for transferring immovable property above a notified value from ineligible persons.

This clause will only take effect once the Federal Government notifies a specific value. 

No person can sell securities, mutual funds, or open an account for ineligible individuals or associations of persons. 

A banking company is restricted from opening or maintaining certain bank accounts for notified persons, except Asaan and Pensioner Accounts. This ban would also extend to allowing cash withdrawals exceeding a specified amount, as notified by the FBR.