The government has introduced a new legal mechanism that requires reporting of high-value banking activity for digital tax verification.
Under the new framework, details of account holders whose deposits or withdrawals exceed Rs. 100 million within six months will be reported for digital cross-matching with tax records.
The new reporting system will take effect from July 1.
Authorities introduced the measure through the Finance Act 2026 as part of wider efforts to identify under-reporting of sales, inflated expense claims, and unreported taxable activity.
As a result, financial transaction monitoring will become more data-driven and digitally integrated.
What Changes Under the New Finance Act 2026?
To implement the mechanism, the government inserted Section 165AB titled Reporting of Financial Transaction Data by Banking Companies and Financial Institutions into the Income Tax Ordinance, 2001.
Under this provision, every banking company and Electronic Money Institution must electronically upload specified financial transaction data to a Central Data Hub.
The uploaded data will support algorithmic cross-matching between tax records and banking information.
The framework applies regardless of provisions contained in other banking and financial laws.
According to the law, this process aims to improve compliance detection while reducing reliance on manual verification.
Which Transactions Will Be Reported?
The law applies to account holders whose combined deposits or withdrawals exceed Rs. 100 million during a reporting period across one or multiple accounts.
Banks will submit financial information that includes deposit and withdrawal records, opening balances, closing balances, total credits, and peak credits.
Under the law, the term “accounts” covers current accounts, call accounts, savings accounts, fixed deposits, term deposits, and other forms of bank deposits.
Meanwhile, “peak credits” refers to the highest credit balance recorded across all accounts held by an account holder during the reporting period.
This reporting requirement focuses specifically on transaction thresholds outlined in the legislation.
How Will the Reporting System Work?
The reporting cycle divides each financial year into two separate periods.
The first period runs from July 1 to December 31, while the second extends from January 1 to June 30.
Banks and financial institutions must submit data by January 31 and July 31 respectively.
Once uploaded, the information will undergo digital processing and algorithmic cross-matching.
According to the law, income tax authorities will not access this information during the initial cross-matching stage.
However, if the system detects a significant mismatch, it will transfer the case to the Compliance Risk Management system for further review through the National Faceless Centre.
Role of State Bank and Data Protection Measures
The law also allows the State Bank of Pakistan to establish, operate, and maintain a secure centralised virtual repository for banking information.
This repository may store financial records and transaction data maintained by scheduled banks through unique identifiers prescribed by the Board.
At the same time, authorities have assigned responsibility for maintaining strict confidentiality standards.
The Federal Board of Revenue will remain responsible for protecting the received information and preventing disclosure or misuse except where permitted under the law.
What Is the Purpose of the Central Data Hub?
The Central Data Hub will operate under the Board through PRAL and will support automated compliance analysis.
Meanwhile, the Compliance Risk Management system will identify and communicate potential risks linked to concealed sales, overstated expenses, and unreported financial activity.
Officials expect the system to strengthen digital oversight and improve tax compliance processes.
At the same time, the framework introduces additional reporting obligations for financial institutions dealing with large-value transactions.
The new mechanism marks another step toward integrating financial and tax data under Pakistan’s evolving digital compliance structure.
