ISLAMABAD: The federal government has introduced a new reporting system for high-value bank transactions to improve tax compliance. Under the Finance Act 2026, banks and financial institutions must report account holders whose deposits or withdrawals exceed Rs. 100 million within six months. The new rules will take effect on July 1.
The government announced the measure through the Finance Act 2026, issued on Monday. It aims to identify people and businesses that under-report sales, overstate expenses, or fail to declare taxable income.
To support the new system, the government has added Section 165AB, titled Reporting of Financial Transaction Data by Banking Companies and Financial Institutions, to the Income Tax Ordinance, 2001.
Under the law, every banking company and electronic money institution must electronically upload specific financial transaction data to a central data hub. The system will use algorithms to compare banking records with tax data. This requirement applies despite the provisions of other banking and financial laws.
Banks will report account holders whose total deposits or withdrawals exceed Rs. 100 million during a reporting period. The submitted information will include deposits, withdrawals, opening balances, closing balances, peak credits, and total credits across all bank accounts.
The reporting period will cover two parts of the financial year. The first period will run from July 1 to December 31, while the second will cover January 1 to June 30. Banks must submit the data by January 31 and July 31, respectively.
The law also explains how the information will be processed. During the initial cross-matching stage, the system will process the data digitally. Income tax officers will not have direct access to the information at that stage.
However, if the system detects a significant mismatch between banking and tax records, it will automatically send the case to the compliance risk management system. The National Faceless Centre will then handle further proceedings.
In addition, the State Bank of Pakistan may establish, operate, and maintain a secure centralized virtual repository of banking data. The repository may store financial records, transaction details, and other information maintained by scheduled banks. It will organize the data using unique identifiers as prescribed by the Board.
The Finance Act also places strict responsibility on the Federal Board of Revenue to protect the confidentiality of banking information. The FBR must prevent unauthorized disclosure or misuse of the data unless the law specifically allows it.
According to the law, the term “accounts” includes current, call, savings, fixed, term deposit, and other types of bank deposit accounts. Meanwhile, “peak credits” refers to the highest credit balance recorded across all accounts of an account holder during the reporting period.
The Central Data Hub will operate under the Federal Board of Revenue through PRAL. At the same time, the compliance risk management system will identify and communicate tax compliance risks linked to concealed sales, inflated expenses, and unreported financial transactions.
