Proposed changes to Pakistan's tax laws to make it much harder for non-filers to buy property, vehicles

After announcing a slew of measures against non-filers, Pakistan's tax collection authority has now begun work to abolish the categories of "late-filers" and "non-filers" from the Income Tax Ordinance 2001.

A senior official informed Nukta that the Federal Board of Revenue (FBR) will present the bill for ending the categories in the National Assembly this week after the federal cabinet's approval.

The Pakistani government wants every individual to disclose their sources of income while making financial transactions, particularly when purchasing properties and vehicles, according to the official.

Through the proposed amendment, the FBR will suggest different monetary limits and thresholds for explaining sources of income.

What will the impact be?

Under the proposed bill, filers can conduct property transactions of huge amounts by specifying the property's market value and resources. However, non-filers will have to explain their source of income while carrying out financial transactions, buying old cars up to 660cc or property transactions up to PKR 10 million.

If a person is a filer and able to justify his sources of income, then his family, including wife (non-filer), mother/father (non-filer), teenage children (non-filer), and unmarried/divorced/widow daughter will not be required to file returns for carrying out financial transaction.

On the other hand, family members of non-filers will also have to give sources of income for carrying out financial transactions.

Officials said that the FBR will also introduce a mobile app for the general public for declaration of resources. If details are lodged via the app, the taxpayer will not be required to go to the concerned commissioner for taking any certificate of exemption, but only fill the "sources" column in the mobile app.

The amendments come after the government introduced the "late-filer" category in the budget for fiscal year 2024-25, which empowers the FBR to collect 6-8% advance tax on sale of immovable properties.

Recently, the Lahore High Court (LHC) declared that the new income tax rates for late filers cannot be charged on past property transactions.