What is FBR's New Cash Withdrawal Limit and High-Risk Taxpayers?

The recent press conference by the FBR chairman sheds light on significant developments in Pakistan's tax system aimed at identifying and addressing non-filers. A strict system of checks has been introduced, focusing on cash withdrawals and deposits to ensure compliance and enhance tax accountability. Below is a detailed explanation of these measures, their implications, and what taxpayers need to know.

Thresholds for Cash Withdrawals and Deposits

The FBR has introduced specific criteria for identifying individuals who might be evading taxes. These include:

Cash Withdrawals:

Individuals withdrawing more than PKR 3.5 million annually will be flagged.

Those with two or more bank accounts are also subject to scrutiny. If you only have one account but withdraw more than PKR 3.5 million annually, you will still be monitored.

Cash Deposits:

Deposits exceeding PKR 28 million annually will trigger inclusion in the "high-risk" category.

Actions for Non-Filers

Individuals flagged under these criteria will face the following steps:

1.      Issuance of Notices: Non-filers will receive formal notices requiring them to:

File their tax returns.

Provide explanations for their financial activities.

Clarify sources of income and justify their transactions.

2.      Forced Registration: If the notice is ignored:

FBR will register the individual forcibly.

The person will still be required to file tax returns.

3.      Enforcement Measures: Further non-compliance leads to:

Freezing of bank accounts, restricting transactions to basic necessities.

Prohibition on purchasing or selling properties, vehicles, and investments such as shares.

Implications for High-Risk Individuals

Individuals categorized as high-risk face significant restrictions until they comply with FBR requirements. These include:

Providing comprehensive details of income and expenditure.

Ensuring transparency in financial activities to demonstrate sufficient resources.

Non-compliance results in prolonged restrictions, including limited access to banking and investment facilities, as well as monitoring of transactions.

Exemptions and Safe Transactions

Certain transactions remain safe from scrutiny:

1.      Non-Cash Transactions:

Online banking, fund transfers, or pay orders where no physical cash is involved.

Inward remittances (money received from outside Pakistan) are not subject to these checks.

2.      Transparent Trail:

Transactions with documented sources and destinations are less likely to trigger FBR’s monitoring.

Encouraging Compliance

The FBR's strategy aims to encourage non-filers to join the tax net by making non-compliance increasingly inconvenient. Filing tax returns and maintaining transparent financial records is the only way to avoid these restrictions.

The new measures by the FBR highlight the government's focus on improving tax compliance and broadening the tax base. While these checks might seem stringent, they aim to curb tax evasion and promote fairness in the system. Individuals and businesses are urged to comply with these requirements, ensure transparency, and file their tax returns to avoid facing restrictions.

Stay updated with future developments and ensure proactive compliance to navigate these changes smoothly.

This article was published at How Much Cash You Can Deposit and Withdraw Without Trouble?