Islamabad: The federal government is reviewing proposals to ease restrictions on foreign currency inflows under Section 111(4) of the Income Tax Ordinance, including raising the annual threshold for foreign remittances that are exempt from scrutiny, according to a report by The Express Tribune, citing official sources.
Among the proposals under consideration is an increase in the current PKR 5 million annual “no-questions-asked” threshold for foreign remittances, which officials reportedly believe has become outdated due to declining purchasing power.
Under existing law, the Federal Board of Revenue cannot question the source of foreign exchange remitted through formal banking channels if the amount does not exceed PKR 5 million in a tax year and is supported by a bank certificate.
Another proposal being reviewed would allow individuals to bring unlimited foreign currency into the country, subject to certification by the State Bank of Pakistan to verify the legitimacy of both the sender and recipient. Officials said the measure is aimed at addressing concerns related to money laundering and unexplained income.
No final decision has been taken, although discussions are said to be at an advanced stage.
Section 111(4) of the Income Tax Ordinance currently protects certain foreign remittances from tax scrutiny when routed through formal banking channels. A few years ago, the remittance threshold was reduced from PKR 10 million to PKR 5 million to limit the conversion of untaxed money into legal assets without disclosure of income sources.
The previous government had proposed replacing the PKR 5 million threshold with an annual limit of USD 100,000 in the 2023 budget, but the amendment was later withdrawn following objections from the International Monetary Fund.
At current exchange rates, PKR 5 million is equivalent to approximately USD 17,900, while USD 100,000 equals nearly PKR 28 million.
Separately, tax advisory firm Tola Associates has proposed increasing the declaration threshold to USD 100,000, arguing that the move could help mobilise up to USD 20 billion annually through the repatriation of FATF-compliant overseas assets.
The firm also suggested a tax-free incentive of PKR 10 per US dollar remitted through formal banking channels, which it estimates could increase formal remittances by USD 4 billion to USD 5 billion annually and support external sector stability. According to its projections, stronger inflows could contribute to lower inflation, higher economic growth, and an appreciation of the rupee, although these outcomes remain contingent on inflows materialising.
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