The Finance Bill 2025-26 has introduced a new section 114C to the Income Tax Ordinance 2001. This addition specifically targets large financial transactions such as property and vehicle purchases, aiming to limit such dealings to individuals and entities within the formal tax net.

Under the newly inserted Section 114C, only anEligible Personcan carry out high-value transactions. The law defines an eligible person based on two key criteria:

1. Tax Filing Compliance: The individual or entity must have filed income tax returns for the immediate preceding tax year in which the transaction occurs. This requirement is intended to promote regular and timely tax filing.
2. Declared Financial Resources: The person must demonstrate sufficient declared resources in their wealth statement or financial accounts to justify the value of the transaction. This provision is designed to ensure that purchases are made through disclosed and lawful income sources.

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The amendment is a part of the governments broader efforts to curb tax evasion, especially in the real estate and automobile sectorsareas often criticized for facilitating unreported and undocumented wealth circulation.

Experts suggest that the enforcement of Section 114C could significantly tighten the noose around non-filers and individuals attempting to launder money through asset acquisitions. However, they also emphasize the need for robust enforcement mechanisms and public awareness to ensure the laws effectiveness.

The new law sends a clear message: major financial transactions are now closely tied to tax accountability. Those outside the tax system may soon find themselves excluded from major segments of the formal economy.