Cross-border
Receiving Money From Abroad: What Section 111(4) Does and Does Not Do
Section 111(4) stops FBR asking you to explain the source of foreign exchange remitted through normal banking channels, up to five million rupees in a tax year, where a scheduled bank encashes it into rupees and issues a certificate. It is a shield against the unexplained-income provisions, not an exemption. Income that is taxable stays taxable: a freelancer's export receipts are charged under section 154A regardless.
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Where these figures come from
- Statutory basis
- Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
- Last checked against the statute
- by BarrioVibe, which files income tax returns through FBR IRIS.
These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.
The four conditions, all of which have to hold
Read closely, because three of the four are things you have to do rather than things that happen automatically.
- The money is foreign exchange remitted from outside Pakistan
- It comes through normal banking channels
- It does not exceed five million rupees in the tax year
- A scheduled bank encashes it into rupees AND issues a certificate to that effect, which you produce
The encashment condition is the one people fail
The section requires the foreign exchange to be encashed into rupees by a scheduled bank, with a certificate produced. Money that arrives and sits in a foreign currency account has not been encashed, so the condition on its face is not met.
The certificate is the other half. It is not enough that the encashment happened; the statute says a certificate from the bank is produced to that effect. Ask for it at the time. Reconstructing a certificate for a transaction three years old, from a bank that has since reorganised its branches, is a great deal harder than requesting one when the money lands.
What happens above five million
Nothing automatic, and that is worth saying plainly rather than alarmingly. Exceeding the ceiling does not make the money taxable and does not create a presumption against you. What it does is remove the statutory shortcut, so the ordinary position applies: if asked, you explain the nature and source of the amount, and section 111 bites only where no explanation is offered or the Commissioner does not find it satisfactory.
For most people reading this, the explanation is easy and documented: an invoice, a contract, a client, a platform statement. The shortcut in section 111(4) exists for cases where producing that is awkward. Keeping the underlying records is what makes the ceiling a formality rather than a cliff.
What the income itself is taxed at
Since section 111(4) says nothing about the tax on the income, this is the figure that actually matters for an exporter of services. The calculator shows the position with and without PSEB registration, which is where the difference is largest.
Freelancer & IT ExportAnd if you are resident, the declaration obligations are separate again
Section 111(4) concerns money arriving. Section 116A concerns assets held: a resident individual with foreign assets of USD 100,000 or more, or foreign income of USD 10,000 or more, must file a foreign income and assets statement with the return, and the penalty for not doing so runs at 2% of the asset value for every year of default.
They interact in the obvious way. Money that came in under section 111(4) and was spent is not a foreign asset. Money that stayed abroad, or bought something abroad, is. A person can be entirely clean on the remittance question and in default on the declaration one.
Questions
The questionspeople ask
Is foreign remittance taxable in Pakistan?
The remittance itself is not a separate charge, but section 111(4) does not make the underlying income tax free. It only stops FBR treating the money as unexplained income, up to five million rupees a year and subject to encashment and a bank certificate. If the money is payment for services you exported, it is taxable under section 154A regardless.
What is the limit for foreign remittance in Pakistan?
Five million rupees in a tax year for the section 111(4) protection. Pages describing it as unlimited are describing law that expired: there was no cap until the Finance Act 2018 set one at Rs 10 million, and the Finance Act 2019 reduced it to Rs 5 million, where it remains.
Does section 111(4) cover Payoneer and Wise?
Yes. An Explanation inserted by the Finance Act 2022 deems remittance through money service bureaus, exchange companies or money transfer operators to be remittance through normal banking channels for the purposes of the sub-section.
What certificate do I need for a foreign remittance?
The Ordinance requires a bank certificate of encashment but never prescribes a form, because the power in section 111(5) was never exercised. In practice it is the State Bank's Proceeds Realization Certificate. Ask for the e-PRC for the specific credit and the statement of PRCs for the tax year, since the five million rupee test works on the year's aggregate.
Is the foreign remittance limit USD 100,000?
No. That figure was a Finance Bill 2023 proposal that was dropped and never became law, and it is reinforced by confusion with the genuine USD 100,000 foreign assets threshold in section 116A, which triggers a filing obligation rather than capping remittances. The section 111(4) figure is five million rupees in a tax year.
What happens if my remittances exceed five million rupees?
The statutory shortcut stops applying and the ordinary position resumes: section 111 catches an amount only where no explanation of its nature and source is offered, or the explanation is not satisfactory to the Commissioner. With invoices and contracts, that is usually straightforward.
Does the money have to be converted into rupees?
For section 111(4), yes. The sub-section requires the foreign exchange to be encashed into rupees by a scheduled bank with a certificate produced. Funds left sitting in a foreign currency account have not been encashed.
Do freelancers pay tax on money received from abroad?
Yes, on the income. Export proceeds for IT and IT-enabled services are withheld under section 154A at 0.25% for a PSEB-registered exporter and 1% otherwise. Section 111(4) is about explaining the source of funds and does not change that charge.
Is a remittance the same as a foreign asset for tax purposes?
No, and they are governed by different sections. Section 111(4) deals with money arriving from abroad. Section 116A requires a resident individual holding foreign assets of USD 100,000 or more, or foreign income of USD 10,000 or more, to file a foreign income and assets statement, with a penalty of 2% of the value for each year of default.
Also here
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What section 116A requires of a Pakistani resident who owns a company abroad, the penalty that runs every year, and the point at which it stops being a filing question.
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The 5 per cent on offshore digital services that catches hosting and ads, the 15 per cent that catches consultancy, and the exclusions that stop both.
Rather have someone handle it?
We file returns through IRIS every day. If the answer above raises a question about your own case, that is the conversation to have before the deadline rather than after it.