Curbs on economic transactions of ‘ineligible persons’: FBR explains Section 114C of Finance Act

ISLAMABAD: The Federal Board of Revenue (FBR) will notify a date for imposing restrictions on the economic transactions of “ineligible persons”, who would fail to declare sources of income/investments in their wealth statements.

Explaining the Finance Act 2025, the FBR has issued income tax circular (1 of 2025) here on Monday.

According to the circular, section 114C has been introduced through Finance Act, 2025. This provision introduces a concept of eligible and ineligible person based upon the financial capacity of a person to conduct an economic transaction in terms of cash or cash equivalent assets declared in the wealth statement filed for the latest tax year or an evidentiary source reflected in investment and expenditure statement filed as justification for availability of funding for conducting an economic transaction during the year.

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To be qualified as an eligible person for carrying out specified economic transaction, sufficient resources must be available either in the wealth statement or in the financial statement for the tax year immediately preceding the year of transaction; or in a statement of source of investment and expenditure filed during the year of transaction showing sufficient resources.

Sufficient resources have been defined as one hundred and thirty percent of cash and cash equivalent assets comprising cash denominated in local or foreign currency, fair market value of gold, net realizable value of stocks, bonds, receivables; or any other cash equivalent asset as may be prescribed.

Moreover, an economic transaction involving exchange of already declared capital assets as consideration has been treated as part of cash and cash equivalent assets to the extent of the value mentioned in the transaction agreement.

In case of an individual, the term ‘eligible person’ includes his immediate family members i.e. parents, spouse and dependent children.

Under this new regime, an ineligible person has been barred from purchase of motor vehicle with an invoice value exceeding Rs 7 million; acquisition or transfer of immoveable property having fair market value exceeding Rs 100 million; investment in securities, unit of mutual funds or similar investment having its cost of acquisition exceeding Rs 50 million subject to the condition that the investment up to fifty million rupees must be a new investment in any financial year excluding reinvestment out of liquidation or profit of already held investment.

It is highlighted that the sufficient resources declared in source of expenditure statement will not constitute as nature or sources of income for the purposes of section 111 of the Ordinance. Cash withdrawal from any of his bank account exceeding an amount Rs 100 million is also prohibited under this section.

The provision of this section will not apply on transactions made by a non-resident person or a public company except the transaction of withdrawal of cash.

Moreover, the provisions of this section will come into force from such date as may be notified by the Federal Government through notification in the official Gazette, FBR added.

Copyright Business Recorder, 2025