Senate panel backs law to freeze non-filers’ accounts over Rs1mn, tighten asset purchases

Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, has endorsed the Tax Laws Amendment Act 2024, which proposes closing bank accounts of non-filers with balances exceeding Rs1 million and imposes stringent requirements on filers to explain the sources of funds for buying assets like homes and cars. 

The proposed legislation introduces the concepts of eligible and ineligible persons, where even filers may be deemed ineligible for certain transactions. Only eligible individuals will be allowed to purchase property, vehicles, or shares within a limit of 130% of the declared value of their assets in previous tax returns.

Under the new rules, ineligible persons cannot operate bank accounts holding over Rs1 million, except for a capped Asaan account. Cash withdrawals beyond a certain limit will also be prohibited. 

According to the bill, ineligible persons cannot purchase or register vehicles exceeding 800cc, except for certain categories such as rickshaws, tractors, pickups, trucks, and buses. 

The legislation will also restrict real estate transactions where property is not transferred into the buyer’s name, including those conducted through the Defence Housing Authority (DHA).

Federal Board of Revenue (FBR) Chairman Rashid Langrial confirmed that the restrictions would also apply to DHA, stating that eligibility checks would be conducted when property rights are transferred.

The law mandates the closure of all bank accounts held by ineligible persons, except Asaan accounts, which have a Rs1 million cap. Filers must either meet eligibility criteria or downgrade existing accounts to Asaan accounts. 

The FBR chief said that within two to three months, the State Bank of Pakistan (SBP) would have a complete database of individual bank accounts, enabling the implementation of these measures.

The government has also sought authority to share taxpayers’ data with commercial banks. Banks must provide the names and account numbers of individuals whose financial data does not align with declared information, leveraging data algorithms for discrepancy detection.

FBR chairman acknowledged the FBR’s current inability to enforce post-purchase audits effectively due to limited capacity.

Finance Minister Muhammad Aurangzeb stated that people would have to justify the source of funds before making asset purchases. He admitted concerns that these restrictions might disrupt the real estate market, as highlighted during a meeting of the prime minister’s task force on housing development.

Senator Anusha Rahman proposed extending restrictions to gold purchases and suggested applying the source-of-funds requirement to property sellers as well. The committee agreed to incorporate these suggestions into the legislation.

The bill will now move to the National Assembly for further consideration and voting.