Introduction: Why Declaring Business Bank Accounts Matters
If you’re running a business in Pakistan whether as a sole proprietor, partnership firm (AOP), or company you are legally required to declare all your business bank accounts. This is not a formality. Ignoring it can lead to hefty fines, disallowed expenses, and even audits.
The requirement is rooted in Pakistan’s Income Tax Ordinance, particularly in sections 2, 10A, 21, 114A, and 182. While most taxpayers worry about tax returns and wealth statements, this overlooked rule can silently trap businesses into non-compliance.
What is a Business Bank Account?
According to Section 2, a business bank account is any account used for conducting business transactions.
Example: Suppose two partners, Mr. A and Mr. B, run an AOP. The AOP has its own bank account, separate from their personal accounts. Profits earned through the AOP are first deposited in the AOP’s account and then distributed to the partners individually. This separation ensures transparency.
Who Must Declare Their Accounts?
The law applies to all types of businesses, including:
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Sole Proprietors (e.g., a freelancer with a business account in HBL).
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Associations of Persons (AOPs) (e.g., a law firm run by two partners).
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Companies (private or public limited).
👉 These accounts must be declared through IRIS, specifically by filling Form 181 (Modification).
⚠️ Note: This is separate from wealth statements. Companies and AOPs don’t file wealth statements but are still obligated to declare bank accounts.
Why Do Businesses Open Multiple Accounts?
Many businesses maintain accounts in different banks to make it easier for customers nationwide.
Example: A wholesale supplier in Karachi might open accounts in MCB, UBL, and HBL so clients across Pakistan can deposit payments easily. This is common practice, but each of these accounts must be declared in IRIS.
How to Declare Business Bank Accounts on IRIS
When filing, you must report every account used for business transactions.
Options include:
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Declaring them in your business balance sheet (filed with returns).
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Using Form 181 (Modification) to enter details such as:
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Account number
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Bank name
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Effective date
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Example: If your business uses three accounts to receive payments and pay expenses, all three must be listed. Leaving even one out can create problems during audits.
Consequences of Not Declaring
Failure to declare accounts carries serious penalties:
1. Audit Risks
2. Disallowance of Expenses (Section 21)
3. Financial Penalties (Section 182)
If an auditor finds that you declared only two accounts but actually operate three, this is considered misrepresentation.
Expenses paid from undeclared accounts are not accepted.
Example: If your business expenses total PKR 100,000, but PKR 30,000 was paid through an undeclared account, only PKR 70,000 will be allowed. This artificially increases your taxable profit.
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PKR 10,000 per day penalty.
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Minimum fine: PKR 100,000 per undeclared account.
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Continued non-compliance may attract further legal actions.
Why Compliance Can’t Be Ignored
Even if the FBR has not sent you a notice yet, it doesn’t mean you’re safe. Future audits or stricter officers may enforce the law to its fullest.
Think of it this way: just as you never ignore recording your sales or marketing expenses, you shouldn’t ignore declaring your bank accounts. It’s part of responsible business management.
Conclusion: Declare Before It’s Too Late
If you’re running a business in Pakistan and haven’t declared all your business bank accounts yet, it’s time to act.
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Review your bank accounts.
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File Form 181 on IRIS.
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Ensure complete compliance.
Remember: Non-compliance not only costs money but also damages your credibility with the FBR. Proactive compliance today can save you from penalties and stress tomorrow.
FAQs on Business Bank Account Declaration
1. Do I need to declare my personal bank account?
No, only accounts used for business transactions must be declared.2. How do sole proprietors declare accounts?
Through Form 181 on IRIS, mentioning each business account.3. What if I pay expenses from an undeclared account?
Those expenses will be disallowed, increasing your taxable income.4. Is the penalty applied per account or per taxpayer?
Per undeclared account. Each account attracts a separate penalty.