Foreign exchange remittances through normal banking channels
Foreign exchange remittances through normal banking channels: As per sub-section (1) of section 111, where any amount is credited in a person’s books of accounts or a person has made any investment or is the owner of any money or has incurred expenditure or has concealed income and the person offers no explanation about such amount, investment, money, expenditure or income or the explaxnation is not satisfactory, such amount or the value of such investment, money, expenditure or income is added to the person’s income chargeable to tax.
However, the said provision is not applicable to any amount of foreign exchange which is not exceeding Rs.10 million in a tax year remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate to this effect is produced from such bank.
Through the Finance Act, 2019, the limit of ten million has been reduced to Rs. 5 million in a tax year. So if the amount of foreign exchange remitted from outside Pakistan is equivalent in rupees up to Rs.5 million in a tax year, the source of such foreign remittance cannot be asked. Even if the amount of foreign remittance is more than Rs. 5 million in a tax year, the Commissioner can only ask the source of foreign remittance.
In case the source is explainable, no further proceedings will be undertaken. Foreign remittances exceeding Rs. 5 million do not attract any addition in income chargeable to tax. Only if the foreign remittance’s source is not explainable, such amount will be added in income chargeable to tax.