The Federal Board of Revenue (FBR) has issued a stern warning to property buyers and investors, emphasizing that cash transactions or dealings conducted outside formal banking channels will be strictly penalized in the tax year 2026. Individuals attempting to purchase immovable property without using approved banking or digital payment methods face significant fines, as the FBR seeks to enforce compliance and curb tax evasion in Pakistan’s real estate sector.
According to the latest directive, any property purchase with a fair market value exceeding PKR 5 million executed through cash, bearer cheque, or other non-banking means will incur a penalty of 5 percent of the property’s assessed value. The valuation will be determined either by the FBR under Section 68 of the Income Tax Ordinance, 2001, or by the relevant provincial authority for stamp duty purposes, with the higher amount used for penalty calculation. This measure underscores the government’s efforts to ensure all high-value transactions are transparent and traceable.
Section 75A of the Income Tax Ordinance, 2001, mandates that all high-value property acquisitions must be conducted through approved banking or digital channels. These include crossed cheques drawn from a bank, crossed demand drafts or pay orders, other authorized banking instruments, and digital transfers between verified bank accounts. While the threshold for immovable property is set at PKR 5 million, similar rules apply to other high-value assets worth over PKR 1 million.
The FBR has clarified that failure to comply with these regulations will carry substantial consequences. Transactions executed outside approved banking channels will not be eligible for any tax allowances under Sections 22-25 of the Income Tax Ordinance. Furthermore, the purchase amount will not be recognized as the cost for computing capital gains upon resale under Section 76, which can significantly impact financial planning for property owners.
For prospective property buyers, adherence to these rules is critical. Ensuring all payments are made through verified banking or digital channels helps avoid costly penalties, provides legal protection, and guarantees eligibility for applicable tax allowances. Buyers are advised to verify transaction methods, calculate potential fines, and seek guidance from banks or certified tax advisors before completing high-value property deals.
The FBR emphasizes that these regulations are aimed at improving transparency in the real estate market, fostering accountability, and reducing avenues for tax evasion. By formalizing property transactions, the authorities aim to create a more efficient, regulated, and traceable real estate ecosystem in Pakistan, which benefits both investors and the national revenue system.
As Pakistan’s real estate sector continues to grow, adherence to banking channel requirements will be crucial for legal and financial security. Property buyers and investors are encouraged to stay informed, plan transactions carefully, and leverage professional advice to ensure compliance with the 2026 rules.
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