Finance Bill 2025 Tax Penalty: Here’s How Much Non-Filers Will Pay If Fail to File Taxes on Time

The federal government has proposed a new and high penalty in the Finance Bill 2025 to strengthen tax enforcement and promote economic documentation.

As per reports, the Finance Bill 2025 introduces high penalties for non-compliance, particularly targeting low tax payers and sectors with strong digital activity. The proposed reforms aim to reduce tax evasion, discourage cash-based transactions, and encourage transparency across the economy.

Individuals who fail to file their income tax returns on time will face heavy fines. One major amendment includes increasing the penalty for failing to submit withholding tax statements from Rs 5,000 to Rs 50,000, a tenfold increase. This is expected to compel withholding agents to submit returns punctually.

Strict tax penalties have also been proposed in the Finance Bill 2025 for online marketplaces that allow unregistered or non-resident sellers to operate without proper registration under the Sales Tax Act or Income Tax Ordinance. A fine of Rs 500,000 will apply for the first violation, and Rs 1,000,000 for each subsequent offense. These penalties extend to both online platforms and courier services that facilitate such transactions.

Banks, payment gateways, and courier services that fail to deduct the applicable tax at the time of payment to sellers or fail to deposit the deducted tax with the government will also be penalized. For transactions involving digitally ordered goods or digital services, the penalty will equal 100% of the tax amount in case of any violation.

Under the new framework, banks and courier services are designated as withholding agents for transactions involving the purchase of goods and services online. These agents must deposit the withheld tax with the Federal Board of Revenue (FBR) and transfer the remaining amount to the seller.

The bill introduces amendments across various sectors, tightening controls on financial transactions. These proposed measures build on earlier changes from the Tax Laws (Amendment) Bill 2024. One significant change is the shift in authority for property valuation from the FBR to the federal government. Until an official valuation is announced, there will be no restrictions on property registration, documentation, or verification, and no individual will be disqualified from such transactions.

The Finance Bill 2025 also includes exemptions for pensioners’ bank accounts from restrictions on maintaining current or savings accounts. The definition of an “eligible person” has been broadened to include individuals who have declared their sources of investment and expenditures and provided a satisfactory explanation for any purchases or investments.

The bill removes the 25-year age limit for a “special child” to be considered a close family member, allowing individuals aged 26 and above who are financially dependent on their parents to qualify.

The definition of “adequate resources” has been expanded to include the net fair value of assets in local or foreign currency, such as cash, gold, stocks, bonds, receivables, and other cash-equivalent assets. Individuals may disclose these in their declaration of investment and expenditures or in the wealth statement filed for the latest tax year.

For companies and associations of persons (AOPs), adequate resources will include cash and cash-equivalent assets listed in financial statements submitted with income tax returns. A new clause in the definition states that if an asset is acquired in exchange for a capital asset that was previously disclosed in a wealth statement, financial statement, or investment source declaration, then the exchanged capital asset will be treated as cash-equivalent up to its stated value in the agreement.

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