Government Relaxes Asset Purchase Rules for Non-Filers

Finance Minister Muhammad Aurangzeb on Monday unveiled new tax measures amounting to Rs. 36 billion, while also significantly easing earlier proposed restrictions on asset purchases based on declared income.

The original plan aimed to bar individuals from buying homes, cars, or making large financial transactions if their declared income did not justify such expenditures. However, under the revised framework, this restriction will now apply only to high-end transactions. Specifically, the rule targets:

• Cars exceeding 1,600cc engine capacity

• Residential properties larger than one kanal in major cities and two kanals in others

• Cash deposits exceeding Rs. 100 million annually

• Stock market investments over Rs. 50 million annually

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This rollback, according to experts, considerably weakens the Federal Board of Revenue’s (FBR) enforcement authority. Finance Minister Aurangzeb acknowledged that the changes were made under the direction of the prime minister and cited the FBR’s limited capacity to implement the original provisions effectively.

To meet the revised fiscal targets, the government introduced three key taxation changes:

1. Mutual Funds: Tax on the debt portion of mutual funds for companies has been raised from 25% to 29%.

2. Corporate Securities: Tax on corporate income from government securities increased from 15% to 20%.

3. Poultry Industry: A new Federal Excise Duty of Rs. 10 per day-old chick has been introduced, aiming to collect Rs. 15 billion annually.

Additional Announcements Include:

• Withholding tax abolished on the sale of residential property held for more than 15 years.

• Commutation and gratuity remain tax-exempt for retirees.

• Annual pensions above Rs. 10 million will now be taxed at 5%, although pensioners aged over 75 are fully exempt.

• The tax rate for individuals earning between Rs. 600,000 and Rs. 1.2 million annually has been reduced from 2.5% to 1%.

• A new 20-year low-income housing loan scheme is also being launched.

Tax Fraud Enforcement Reforms:

Aurangzeb also outlined new safeguards for arrest procedures in tax fraud cases:

• No arrests for fraud below Rs. 50 million without a court warrant.

• Arrests allowed only in cases of flight risk, record tampering, or non-compliance after three notices.

• Approval from a three-member FBR committee is required before proceeding with arrests.

• All arrested individuals must be presented before a special judge within 24 hours.

These adjustments mark a strategic recalibration of the government’s tax policy, balancing revenue generation with practical enforcement capacity.