ISLAMABAD: The federal government has enacted a new law under the Finance Act 2026 requiring commercial banks to report high-value financial transactions directly to a central repository. The digital scrutiny mechanism will officially take effect on July 1, 2026.
Under the newly inserted Section 165AB of the Income Tax Ordinance 2001, titled “Reporting of Financial Transactions Data by Banking Companies and Financial Institutions,” banks are legally mandated to bypass traditional confidentiality barriers. They must electronically upload transaction details of account holders whose cumulative deposits or withdrawals exceed Rs 100 million (10 crores) within six months.
The law applies across all account categories including current, savings, fixed, and term deposits. The reporting parameters encompass precise deposit and withdrawal histories, opening and closing balances, total turnover, and the “peak credit” reached during the reporting cycle.
The digital profiling will follow a bi-annual schedule:
First Half (July 1 to December 31): Data must be uploaded by January 31.
Second Half (January 1 to June 30): Data must be uploaded by July 31.
To mitigate potential institutional harassment or blackmail, the legislation enforces strict procedural safeguards. The initial data matching will be executed entirely through computer algorithms, remaining completely inaccessible to individual income tax officials during the cross-verification stage.
If the automated system detects a significant discrepancy between an individual’s declared tax wealth and their bank turnover, the Federal Board of Revenue’s (FBR) Compliance Risk Management protocol will autonomously route the case to the “National Faceless Center” for legal action.
Additionally, the Federal Board of Revenue (FBR) and the State Bank of Pakistan (SBP) have been legally bound to establish a secure, centralized virtual database while guaranteeing absolute confidentiality to prevent any leaks or misuse of citizen financial records.
