Banks in Pakistan are legally required to share specific customer information with the Federal Board of Revenue (FBR). This data-sharing framework is aimed at widening the tax net, improving compliance, and identifying potential taxpayers through documented financial activity. The authority for this reporting comes from Section 165A and 165B of the Income Tax Ordinance, 2001.
Why Are Banks Sharing Information with FBR?
Section 165A overrides banking secrecy laws and empowers FBR to obtain financial data for tax purposes only. The objective is to match lifestyle, transactions, and wealth with declared income, helping FBR detect non-filers and under-reporting.
What Information Do Banks Report?
Under Section 165A(1), every banking company must provide monthly and annual information, including:
• Cash withdrawals exceeding Rs 50,000 in a day, aggregating Rs 1 million or more per month
• Bank deposits aggregating Rs 10 million or more per month
• Credit card payments aggregating Rs 200,000 or more per month
• Profit on debt paid during the financial year and tax deducted
• Business accounts opened or re-designated during the month
This information includes customer name, CNIC, address, account details, deposits, and withdrawals.
Is This Legal Despite Bank Secrecy?
Yes. Section 165A clearly states that these disclosures apply notwithstanding any other law, including the Banking Companies Ordinance and Protection of Economic Reforms Act. Moreover, banks and their officers are fully protected from civil, criminal, or disciplinary proceedings for sharing this data.
How Is Confidentiality Ensured?
Under sub-section (4), all information received by FBR is:
• Used only for tax purposes
• Kept strictly confidential, subject to Section 216 of the Ordinance
What About Non-Residents?
Section 165B extends reporting to financial institutions for non-residents and other reportable persons, enabling automatic exchange of information under international tax agreements and conventions.
What Should Taxpayers Do?
If your banking transactions are significant, ensure:
• You are registered with FBR
• Your income tax return and wealth statement properly reflect your financial activity
• Profit on debt and large transactions are correctly declared
Understanding Sections 165A and 165B helps taxpayers stay compliant and avoid unnecessary scrutiny from tax authorities.
Disclaimer: This article is for general information and awareness only. It does not constitute legal, tax, or professional advice. Tax laws and FBR interpretations may change. Readers are advised to consult a qualified tax advisor or refer to the Income Tax Ordinance, 2001 and official FBR notifications before making any financial or tax-related decisions.