ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday said that unexplained foreign remittances will be subject to income tax.
The FBR issued a circular to explain the amendments brought through Finance Act, 2019 to the Income Tax Ordinance, 2001.
Through the Finance Act, 2019 the limit of foreign remittance for questioning the source has been reduced to Rs5 million from previous level of Rs10 million.
The FBR said that foreign remittances exceeding Rs5 million do not attract any addition in income chargeable to tax. “Only if the foreign remittance’s source is not explainable, such amount will be added in income chargeable to tax,” the FBR added.
The FBR said that as per sub-section of section 111 of Income Tax Ordinance, 2001, where any amount is credited in a person’s books of accounts or a person has made any investment or is the owner of any money or has incurred expenditure or has concealed income and the person offers no explanation about such amount, investment, money, expenditure or income or the explanation is not satisfactory, such amount or the value of such investment, money, expenditure or income is added to the person’s income chargeable to tax.
However, the said provision is not applicable to any amount of foreign exchange which is not exceeding Rs10 million in a tax year remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate to this effect is produced from such bank.
Through the Finance Act, 2019, the limit of ten million has been reduced to Rs5 million in a tax year.
“So if the amount of foreign exchange remitted from outside Pakistan is equivalent in rupees up to Rs5 million in a tax year, the source of such foreign remittance cannot be asked,” the FBR said, adding: “Even if the amount of foreign remittance is more than Rs5 million in a tax year, the commissioner can only ask the source of foreign remittance. In case the source is explainable, no further proceeding will be undertaken.”