Is the money I send home to my family taxable for them in Pakistan?

Money a Pakistani working abroad sends to family in Pakistan runs into two parts of the Income Tax Ordinance, 2001. Section 39 decides whether a gift counts as the recipient’s income. Section 111 decides whether FBR can add money to someone’s income because its source is not explained. This page reads both as they stand in the Ordinance amended to 30 June 2026, which governs tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say about gifts?

Section 39(1) charges “Income from Other Sources” on income of every kind not covered by another head. Clause (la) of that sub-section adds, subject to sub-section (3), “any amount or fair market value of any property received without consideration or received as gift, other than gift received from” a relative as defined in sub-section (5) of section 85.

So the starting rule is that a gift is income of the person who receives it. The exception is a gift from a relative.

Who counts as a relative?

Section 85(5) defines a “relative” of an individual as:

• “an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual”; or
• a spouse of the individual or of any person in the first group.

That definition is wider than parents and children. Read as written, it covers:

Relationship to the sender	Why it is inside section 85(5)
Parents and grandparents	Ancestors of the individual
Children and grandchildren	Descendants of the individual’s grandparents
Brothers, sisters, uncles, aunts, cousins, nephews, nieces	Descendants of the individual’s grandparents
Wife or husband	Spouse of the individual
Parents-in-law, brothers-in-law, sisters-in-law	Ancestors or descendants of the grandparents of the spouse
Spouses of any of the above	Spouse of a person in the first group
Adopted child	Named expressly

A footnote in the consolidated text records that the Finance Act, 2021 replaced a narrower list (“grandparents, parents, spouse, brother, sister, son or a daughter”) in clause (la) with this cross-reference to section 85(5).

What about gifts and loans not sent through a bank?

Section 39(3) is a separate rule. It says any amount received as a loan, advance, deposit for issuance of shares or gift by a person in a tax year from another person (not a banking company or financial institution) “otherwise than by a crossed cheque drawn on a bank or through a banking channel or through digital means” from a person holding a National Tax Number is treated as income from other sources for the year it is received. Section 39(4) excludes only advance payments for goods or services.

Two points about sub-section (3) as written:

• It contains no exception for relatives. The relative exclusion sits in clause (la), and clause (la) is itself stated to be “subject to sub-section (3)”.
• The words “from a person holding a National Tax Number” follow the list of payment methods. The text does not say in terms how this applies where the sender lives abroad and has no National Tax Number. This page does not resolve that point.

What the text does make clear is that cash handed over in person sits outside the banking-channel wording of section 39(3).

How does section 111(4) protect banked remittances?

Section 111(1) lets the Commissioner add to a person’s income any investment, money, valuable article or expenditure whose source the person does not explain satisfactorily. Section 111(4) switches that off for one kind of money: foreign exchange remitted from outside Pakistan through normal banking channels, not exceeding five million rupees in a tax year, that a scheduled bank has encashed into rupees, where the bank’s certificate is produced.

The Explanation to section 111(4) says remittances through money service bureaus, exchange companies or money transfer operators are deemed to be through normal banking channels.

The sub-section does not limit the protection to money a person sends to themselves. Read as written, it covers a family member in Pakistan who receives the remittance, up to the stated amount in a tax year.

Worked example (illustrative figures)

Imran works in Riyadh. In tax year 2027 he sends his father in Sialkot Rs. 150,000 a month through a bank, and sends his cousin in Gujranwala Rs. 400,000 once through an exchange company, to help with a wedding.

1. Father: 12 x Rs. 150,000 = Rs. 1,800,000. A son is a descendant of the father’s grandparents, so the gift is from a relative and falls outside section 39(1)(la).
2. Cousin: Rs. 400,000. A first cousin shares Imran’s grandparents, so this is also a gift from a relative under section 85(5).
3. Section 111(4) for the father: Rs. 1,800,000 is below Rs. 5,000,000, so, with the bank’s encashment certificate, section 111(1) does not apply to it.
4. Section 111(4) for the cousin: Rs. 400,000 through an exchange company is deemed banked under the Explanation, and is also below Rs. 5,000,000.

If Imran had instead given his cousin Rs. 400,000 in cash on a visit, section 39(3) would be the provision to read, because the money did not come by crossed cheque, banking channel or digital means.

What if the person receiving is not a relative?

A friend, a former colleague or a fiancee who is not yet a spouse is outside section 85(5). A gift to such a person is inside section 39(1)(la) as income from other sources of the recipient, whatever channel it comes through. Section 111(4) does not change that, because it only stops section 111(1) from applying. It does not exempt the income under section 39.

Common mistakes

• Assuming only parents and children count. Since the Finance Act, 2021 the test is section 85(5), which reaches cousins, in-laws and their spouses.
• Treating section 111(4) as unlimited. The protection stops at five million rupees in a tax year and needs the bank certificate.
• Assuming a relative’s gift is safe in cash. Section 39(3) is not qualified by the relative exception.
• Reading section 111(4) as a general exemption. It removes the unexplained-income rule for that money. It does not say the money is exempt under any other provision.

What to check in the official text

Read section 39(1)(la), (3) and (4), section 85(5), and section 111(1) and (4) with its Explanation in the official PDF of the Ordinance amended to 30 June 2026. The encashment certificate is issued by the bank; its form is not part of this corpus. Where the recipient also files a wealth statement, the way the money is shown there is a separate question not covered on this page.