The State Bank of Pakistan (SBP) is set to establish and operate a centralized digital system containing banking information and financial transaction data following amendments introduced to the Income Tax Ordinance 2001. The new framework is designed to create a structured mechanism for receiving, processing and cross-checking selected banking information while maintaining confidentiality safeguards around the data.
The changes have been introduced through a newly inserted Section 165AB, which sets out requirements for banks and electronic money institutions to electronically provide prescribed information about account holders whose deposits or withdrawals exceed Rs100 million during a reporting period. The provision will give the central bank access to specified financial information through a digital reporting mechanism rather than relying solely on conventional information-sharing processes.
Under the new system, information submitted by banks and electronic money institutions will be processed through an automated mechanism that will compare banking data with relevant tax information. The process is intended to identify significant discrepancies between reported financial activity and information available through the tax system, allowing potential compliance concerns to be identified through a technology-based screening process.
An important feature of the framework is that the banking information will not initially be visible to income tax authorities during the automated cross-checking stage. This creates a separate initial layer for data processing and comparison, with only cases that meet the criteria for a significant mismatch moving forward for additional review. The arrangement is intended to limit unnecessary access to financial information while allowing potential discrepancies to be identified.
Cases involving significant mismatches will be referred to the Federal Board of Revenue’s Compliance Risk Management system for further action. Such cases will then be handled through the National Faceless Centre, creating a process in which identified tax compliance issues can be examined after the initial automated comparison has taken place. This approach places greater emphasis on data analysis before a case is escalated to tax authorities.
The amendment also establishes definitions for several terms that will be relevant to the operation of the new framework. These include the reporting period, specified date, accounts, peak credits, central data hub and compliance risk management. Defining these terms provides the basis for determining what information is required, when it must be submitted and how it will be processed within the centralized digital structure.
The introduction of the centralized system represents another step toward greater use of digital financial data in tax compliance and monitoring. By bringing selected banking information into an automated cross-checking process, authorities will be able to identify potential inconsistencies based on transaction and account activity rather than relying entirely on manual reviews. At the same time, the framework includes confidentiality provisions intended to protect the information collected through the system.
For banks and electronic money institutions, the new requirements will mean ensuring that their systems can electronically upload the prescribed information within the applicable reporting framework. Financial institutions will therefore need to maintain accurate account and transaction data and comply with the technical and reporting requirements associated with the centralized system.
The new arrangement also creates a distinction between data collection and enforcement. Banking information can first be processed within the centralized digital system without direct visibility to income tax authorities, while cases showing significant mismatches can subsequently be transferred to the Federal Board of Revenue’s compliance mechanism. This structure is intended to combine automated data analysis with targeted tax compliance action while incorporating safeguards around sensitive financial information.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.