Karachi, December 18, 2024 – The Federal Board of Revenue (FBR) is poised to introduce a significant change in the banking sector with the potential imposition of a ban on cash withdrawals by individuals who are non-filers of income tax returns.
This move, which has been incorporated into the Tax Amendment Bill 2024, was presented in Parliament today and aims to enhance the FBR’s ability to curb tax evasion by restricting certain financial transactions for non-compliant individuals.
The bill proposes the addition of a new section, Section 114C, to the Income Tax Ordinance of 2001. Under this new provision, the FBR would be empowered to issue directives to banks, instructing them not to open or maintain current or savings accounts, or investor portfolio securities accounts (excluding Asaan accounts), for individuals who fail to file their income tax returns. This provision targets individuals who are not listed on the Active Taxpayers List (ATL), thus further incentivizing compliance with tax filing obligations.
A critical component of the proposed changes is the restriction on cash withdrawals. The FBR will have the authority to notify the maximum amount of cash that can be withdrawn from the bank accounts of non-filers, further discouraging non-compliance. The new policy could significantly impact individuals who are not fulfilling their tax responsibilities, as the FBR seeks to limit their economic activities by restricting access to liquidity.
In addition to the cash withdrawal restrictions, Section 114C also outlines several other measures designed to limit the economic engagement of non-filers. For instance, the bill proposes that ineligible individuals (those who have not filed their returns) will be prohibited from applying for, booking, purchasing, or registering a motor vehicle. This restriction applies to both manufacturers of motor vehicles and the relevant authorities within the Excise and Taxation Department.
Furthermore, any applications or requests from non-filers to register, record, or transfer immovable property above a certain value, which will be periodically notified by the FBR, will not be processed. The bill also prohibits non-filers from engaging in transactions involving securities, including the buying, selling, or opening accounts for mutual funds, debt securities, or other investments.
However, the proposed bill does include some exceptions. These restrictions will not apply to certain purchases, including the acquisition of rickshaws, motorcycle rickshaws, or tractors. Additionally, individuals may still purchase vehicles with engine capacities up to 800 CC, subject to further restrictions outlined by the FBR. There are also provisions for non-filers to invest in securities, up to a specified limit, as set by the FBR. Importantly, non-filers who submit their tax returns for the latest completed year and provide a statement detailing their sources of investment and expenditure will be exempt from these restrictions.
The proposed measures are part of the government’s broader strategy to improve tax compliance, reduce tax evasion, and broaden the tax net. By leveraging financial institutions and restricting access to essential services for non-filers, the FBR hopes to encourage individuals to fulfill their tax obligations, thus strengthening Pakistan’s revenue collection system. If passed, this legislation will have far-reaching implications for the country’s banking, property, and vehicle registration sectors, significantly altering the financial landscape for non-compliant taxpayers.