ISLAMABAD: The Federal Board of Revenue (FBR) will restrict big transactions by ineligible persons under the new regulatory framework. According to the FBR, the new mechanism will bar ‘ineligible persons,’ who fail to declare the sources of their income or investments, from conducting big economic transactions.
The move, introduced through Income Tax Circular 1 of 2025, aims to enhance transparency and curb undocumented wealth, as outlined in the Finance Act 2025.
Under the new provision, Section 114C, individuals will now be categorized as either eligible or ineligible based on their declared financial capacity. To be deemed eligible for carrying out specified transactions, a person must demonstrate sufficient resources either in their latest wealth statement, financial statement, or source of investment and expenditure statement.
What Qualifies as ‘Sufficient Resources’?
To qualify as eligible, individuals must have financial capacity amounting to at least 130% of the transaction’s value in cash or cash-equivalent assets. These assets include:
- Cash (in local or foreign currency)
- Fair market value of gold
- Net realizable value of stocks, bonds, and receivables
- Any other prescribed cash-equivalent assets
Additionally, declared capital assets used as consideration in a transaction may also be treated as cash-equivalent to the extent of their stated value in the agreement.
In the case of individuals, the term eligible person will also include their immediate family members — parents, spouse, and dependent children.
Transactions Ineligible Persons Will Be Barred From
If a person fails to meet the eligibility criteria, they will be restricted from performing the following transactions:
- Purchasing vehicles with an invoice value exceeding Rs7 million
- Acquiring or transferring property with a fair market value over Rs100 million
- Investing in securities or mutual funds exceeding Rs50 million, unless the investment is entirely new and not from reinvested profits or liquidated assets
- Withdrawing cash exceeding Rs100 million from any bank account in a single year
However, these restrictions will not apply to non-resident individuals or public companies, except in the case of large cash withdrawals.
Clarification on Section 111
FBR clarified that declaring sufficient resources under the source of expenditure statement will not be interpreted as a declaration of income under Section 111 of the Income Tax Ordinance, which deals with unexplained income or assets.
Implementation Timeline
The restrictions under Section 114C will come into effect from a date to be notified by the federal government via the official Gazette.
The FBR’s move signals a firm step toward broadening the tax net and enforcing accountability around high-value financial transactions in Pakistan.
