The government has proposed a significant overhaul to the tax classification system under Section 115 of the Income Tax Ordinance, eliminating the existing distinction between filers and non-filers. The proposed overhaul will make over 10 crore Pakistanis ineligible to buy a car.
Under the new rules, individuals who fail to submit their income tax returns and wealth statements will no longer be eligible to purchase high-value assets or make investments.
As of last fiscal year, nearly 5.6 million of Pakistan’s 130 million adult population filed their tax returns, meaning that over 120 million (12 Crore) citizens are no longer eligible to buy a car or property in the country.
As per the proposed changes, only those who have filed their income tax returns and submitted their wealth statements will be permitted to:
The plan further mandates that individuals seeking to access bank loans, credit, or financing must prove their income and repayment capacity through declared financial channels.
Those with undocumented sources of income will be restricted from availing these financial facilities unless they opt to submit a formal tax return.
To bring undocumented individuals into the tax net, the government will offer an “Option B” — a mechanism through which such persons may file a one-time return to declare assets, pay applicable taxes, and gain eligibility for financial participation in the formal economy.
Editorial & Legal Practice Group
Authored and reviewed by the corporate law and tax litigation practice group at Javid Law Associates. Our team comprises High Court advocates, corporate legal advisors, and authorized tax practitioners across Pakistan.
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Jurisdiction: Pakistan