The federal government has introduced a new reporting framework requiring banks and financial institutions to share details of customers whose cumulative deposits or withdrawals exceed Rs. 100 million within a six-month period. The new measure will take effect from July 1 under the Finance Act 2026.
The initiative aims to strengthen tax compliance by enabling authorities to identify under-reported sales, inflated business expenses, and undisclosed taxable income through digital data analysis.
To implement the system, the government has inserted Section 165AB, titled Reporting of Financial Transaction Data by Banking Companies and Financial Institutions, into the Income Tax Ordinance, 2001.
Under the new provision, all banking companies and Electronic Money Institutions (EMIs) must electronically submit specified financial transaction data to a Central Data Hub, where advanced algorithms will compare banking information with taxpayers’ records. The reporting requirement will apply regardless of provisions contained in other banking or financial laws.
Banks will be required to report customers whose total deposits or withdrawals across one or multiple accounts exceed Rs. 100 million during a reporting period. The submitted information will include deposit and withdrawal records, opening and closing balances, total credits, and the highest credit balance, commonly referred to as peak credits.
Each financial year will be divided into two reporting periods: July 1 to December 31 and January 1 to June 30. Banks must submit the required data by January 31 and July 31, respectively.
According to the Finance Act, the information uploaded to the Central Data Hub will initially be processed through an automated digital system and will not be directly accessible to tax officers. If the system detects significant discrepancies between banking transactions and declared tax information, the case will be forwarded to the Compliance Risk Management (CRM) system for further review through the National Faceless Centre.
The law also authorizes the State Bank of Pakistan (SBP) to establish and maintain a secure centralized digital repository containing banking records and financial transaction data collected from scheduled banks using unique customer identifiers prescribed by the Federal Board of Revenue (FBR).
The FBR has been assigned responsibility for ensuring the confidentiality and security of all banking information received under the new framework. The authority is legally bound to prevent unauthorized access, disclosure, or misuse of the data except where permitted under existing laws.
For the purpose of reporting, the term accounts includes current, savings, call, fixed, term deposit, and other types of bank accounts. Meanwhile, peak credits refer to the highest aggregate credit balance recorded across all accounts held by an individual during the reporting period.
The Central Data Hub will be managed by Pakistan Revenue Automation Limited (PRAL), while the Compliance Risk Management system will be used to identify potential tax risks associated with concealed income, inflated expenses, and unreported financial transactions.
