FBR to introduce new tax measures for late and non-filers

The Federal Board of Revenue (FBR) is preparing to propose a new law to eliminate the “late-filer” and “non-filer” categories in the Income Tax Ordinance 2001.

The draft bill is presently being worked on in response to legal challenges to the Finance Act 2024’s “late-filer” designation, which is presently being examined by the Lahore High Court.

For financial transactions, such as buying a home or a car, the proposed legislation will force people to provide proof of their income sources.

For the purpose of streamlining this process, the FBR intends to set different criteria and financial restrictions for income source declarations.

Family members—such as a non-filing husband, parents, children under 25, and single, divorced, or widowed daughters—will not be required to file financial transaction returns under the new framework if the taxpayer is a filer and can verify their sources of income.

The FBR aims to streamline public transactions by removing the requirement for proof of income when buying used automobiles and motorcycles up to 1300cc.

Justification will be required for any vehicle that exceeds this limit. Furthermore, there are no limitations on property sales up to Rs10 million.

A taxpayer with Rs100 in cash, for instance, can spend up to Rs130 without the tax authorities looking into the remaining Rs30.

However, larger real estate deals costing billions of dollars will necessitate disclosing the property’s market value and funding sources.

The proposed rule would impose fines on individuals who fail to file their taxes, tying access to financial services like bank accounts and investments to compliance. Without the creation of funding sources via digital means, financial transactions will be forbidden.

Based on declared incomes, the FBR is designed to furnish banks with data and set precise thresholds that every financial transaction that exceeds would be reported back to the FBR. The upcoming months should see the implementation of this new system.