The federal government is considering a major tax policy change in Budget 2026-27 that could allow individuals to bring unlimited foreign currency into Pakistan through formal banking channels without facing questions from the Federal Board of Revenue (FBR) regarding the source of funds.
According to sources, authorities are reviewing amendments to Section 111(4) of the Income Tax Ordinance, which currently protects foreign exchange remitted through banking channels from FBR scrutiny up to Rs. 5 million in a tax year.
One proposal under consideration would completely remove the existing Rs. 5 million limit, allowing any amount of foreign currency to be remitted through authorized banking channels, subject to verification by the State Bank of Pakistan (SBP) regarding the identity and legitimacy of both the sender and recipient.
Another option being examined is to substantially increase the existing threshold, which has remained unchanged for years and has lost significant value due to inflation and depreciation of the Pakistani rupee. At current exchange rates, the limit is equivalent to approximately $18,000.
Tax experts believe the proposed change could encourage overseas Pakistanis and investors to transfer funds through legal banking channels instead of informal methods. The move is also expected to improve foreign exchange reserves and strengthen Pakistan’s external account position.
Tax advisory firm Tola Associates has estimated that increasing the declaration threshold to $100,000 could help mobilize up to $20 billion in overseas assets through FATF-compliant banking channels. The firm has also proposed a Rs. 10 per dollar incentive for remittances received through banks, which it believes could generate an additional $4 billion to $5 billion in annual inflows.
The proposal comes amid growing calls from the business community for reforms to attract foreign investment and overseas Pakistani capital. Business groups have urged the government to reduce taxes on foreign assets, restore previous tax residency rules, and gradually phase out the super tax to improve Pakistan’s investment climate.
If approved, the proposed amendment to Section 111(4) would represent one of the most significant tax relaxations for foreign remittances in recent years and could provide a major boost to documented inflows of foreign exchange.
No final decision has been taken so far, but the proposal remains under active consideration as part of broader Budget 2026-27 discussions aimed at supporting economic growth, improving liquidity, and increasing foreign currency inflows into Pakistan.
