Karachi, June 11, 2025 – In a major policy shift to improve tax compliance and documentation of the economy, the Finance Bill 2025 has proposed strict restrictions on various financial transactions for ineligibles — individuals or entities that have failed to file annual income tax returns despite having taxable income.
A new section, 114C, is proposed to be inserted into the Income Tax Ordinance, 2001, which aims to prevent ineligibles from engaging in a wide range of significant economic and financial activities unless they become compliant.
Under Section 114C, ineligibles will be barred from:
• Booking, purchasing, or registering motor vehicles with manufacturers or Excise and Taxation departments.
• Registering or transferring immovable property above a specified value (to be notified by the federal government).
• Investing in securities, including debt instruments and mutual funds.
• Opening or maintaining financial accounts, including savings, current, and investor portfolio securities accounts (with exceptions such as Asaan or Pensioner Accounts).
• Making cash withdrawals beyond a certain limit, which will be notified by the Federal Board of Revenue (FBR).
These restrictions reflect the government’s intention to tighten the net around tax evaders and push them into the formal documentation system. By preventing ineligibles from executing routine but significant financial activities, the state seeks to enhance tax return filings and increase revenue collection.
However, the proposed law provides exceptions. The restrictions will not apply to transactions involving:
• Rickshaws, motorcycles, and tractors.
• Pickup vehicles up to 800cc engine capacity.
• Trucks, buses, and certain other vehicles (with FBR-defined limits).
• Investments in securities up to a specified threshold.
• Non-resident persons and public companies, except where cash withdrawal limits are breached.
To determine eligibility, a person must have either:
1. Filed an income tax return in the year preceding the transaction and declared sufficient financial resources in their wealth or financial statements.
2. Filed a “sources of investment and expenditure statement” explaining the source of funds for the intended transaction.
An ineligible person is defined as one who fails to meet either of the above criteria. Immediate family members (parents, spouse, and dependent children) of eligible individuals are also considered eligible under this section.
The Finance Bill mandates that all or some of these restrictions will come into force through official notification by the FBR with the federal government’s approval. This policy marks a crucial step in broadening the tax base, formalizing undocumented wealth, and strengthening Pakistan’s financial discipline by denying evaders access to key financial channels until they fulfill their tax obligations.