Proposal Aims to Attract Billions in Overseas Funds
The federal government is evaluating a proposal that could significantly increase foreign currency inflows by allowing individuals to bring larger amounts of overseas funds into Pakistan through formal banking channels.
According to officials familiar with the discussions, policymakers are reviewing potential amendments to Section 111(4) of the Income Tax Ordinance as part of broader efforts to strengthen the country’s external financial position and support economic growth.
Currently, the provision prevents the Federal Board of Revenue from questioning the source of foreign exchange remitted through banking channels up to Rs5 million in a tax year.
Meanwhile, one option under consideration would remove the existing cap entirely, provided the State Bank of Pakistan verifies the legitimacy of both the sender and recipient.
Supporters of the proposal believe the move could encourage greater use of formal financial channels and help attract substantial overseas funds into the economy.
Threshold Increase and Incentives Also Under Consideration
Authorities are also examining an alternative proposal that would increase the current Rs5 million threshold, which many experts argue has lost much of its value because of inflation and currency depreciation over time.
At current exchange rates, the existing limit is equivalent to approximately $17,900.
Furthermore, the debate has gained momentum ahead of the upcoming federal budget after tax advisory firm Tola Associates suggested that raising the declaration threshold to $100,000 could potentially channel up to $20 billion in FATF-compliant overseas assets into Pakistan through formal mechanisms.
The firm has also proposed a Rs10-per-dollar incentive for remittances sent through banks, arguing that the measure could increase annual formal remittance inflows by an additional $4 billion to $5 billion.
Meanwhile, the Pakistan Business Council has called for lower taxes on foreign assets, restoration of previous tax residency rules, and the gradual removal of the super tax to encourage investment.
No final decision has been announced, but officials continue reviewing the proposals as part of ongoing budget consultations.
