How much money Overseas can send to Pakistan Is there any Limit of Remittance? If you are an overseas Pakistani and you send money to your or a relative’s bank account in Pakistan and that amount is more than 5 million per year, will you have to pay tax on it? What does the law say about this? This is a common misconception that has spread, and we will discuss it today.
Difference between foreign income and foreign Remittance
If you are overseas and send payment to your own or a relative’s account in Pakistan, it will not be your foreign income, but it will be called Remittance and there is no tax on remittance.
Foreign income is what a person living in Pakistan earns from abroad and brings that earning to Pakistan. That is, if a Pakistani resident is sitting in the country and providing services abroad and the payment is coming to Pakistan from overseas, then this is foreign income, on which tax is applicable under separate conditions.
Mandatory condition for recognizing foreign remittances
Foreign remittances are exempt from tax, but specific conditions set by the government must be met to benefit from this exemption.
- The money must come to Pakistan in foreign currency.
- It must be converted into PKR.
- The conversion must be at the rate of the State Bank.
- After this, the bank will issue you a PRC (Proceed Realization Certificate).
PRC (Proceed Realization Certificate)
This PRC certificate is very important. It states where the money came from, in what currency it came, on what date it came and how much PKR it was converted. This is the proof that it is a Remittance.
How much money Overseas can send to Pakistan?
Now, if you send up to 5 million in a year, the FBR can only ask where the money came from. That is, how is the sender related to you. You can prove this with the NADRA Family Registration Certificate or Family Tree. After this, the FBR no longer asks how the sender earned the money.
Exemption on foreign remittances should be limited to family members only
As per the existing law, foreign remittances sent through banking channels are exempted, however, this exemption should be limited only to family members.
The scope of exemption under this provision of the law should be limited to family members and close blood relations only.
It is proposed by the FBR that the application of this provision should be limited only to close relatives such as husband, wife, father, son, daughter and other blood relations.
The Section 111(4) of the Income Tax Ordinance 2001 prohibits the tax authorities from inquiring about the source of remittances received in Pakistan through banking channels provided that the amount is deposited in Pakistani rupees.
Is tax levied on remittances exceeding Rs 5 million?
Even if the amount is more than 5 million, it is not prohibited, nor is there any tax on it. The only difference is that the FBR can ask where the sender earned this money. For this, you have to show the source of income, such as:
Salary – Salary Slip or Employment Letter
Business -Business Registration or Returns
Rental Income – Rent Agreement
Bank Profit or Capital Gains etc.
Why FBR asked for proof of income if exceed 5 million
The reason is to prove that the sender’s income is legitimate and it is not money laundering.
The real purpose is that some people do not show their full income by doing business in Pakistan, then send money back through Hundi and show Remittance. That is why the limit of 5 million was set so that the source can be asked for large amounts.
Summary
Remittance has never been taxed. Whether it is less than 5 million or more, there is no tax at all.
Only the source of income above 5 million is asked.
So remember:
Money sent from abroad to non-residents is Remittance, not foreign income.
Income from abroad for residents is foreign income, which is taxed.
PRC certificate must be obtained so that proof is available.
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