FBR to Double Tax on Non-Filers’ Cash Withdrawals from July 2025

ISLAMABAD: The Federal Board of Revenue (FBR) has recommended a significant increase in withholding tax on cash withdrawals by non-filers, from the current 0.6% to 1.2%.

This step is part of Pakistan’s upcoming Budget for the fiscal year 2025-26, aimed at boosting tax compliance and expanding the tax base.

The revised tax rate will apply to all cash withdrawals exceeding Rs 50,000 in a single day, whether conducted at bank branches, ATMs, or via credit cards. As per the current rule, non-filers are taxed at 0.6% on such transactions. However, under the new proposal, the entire withdrawal amount will be taxed at the higher rate of 1.2%, starting July 1, 2025.

One of the most notable shifts in the proposal is the elimination of the “non-filer” category altogether. Moving forward, individuals who do not submit income tax returns will be labeled as “ineligible persons.” Unlike current practices, these individuals may face a complete ban on financial transactions, including routine banking operations.

Legislative Backing and Committee Approval

The proposed changes are part of the Finance Bill 2025-26, which incorporates elements of the Tax Laws (Amendment) Bill, 2024. The National Assembly’s Standing Committee on Finance and Revenue has already reviewed and adopted the report. This signals a strong legislative intent to implement tighter economic controls on non-compliant individuals.

To ensure stricter monitoring, the FBR also plans to give banks access to taxpayer data. This would allow financial institutions to track and flag transactions by individuals not listed on the Active Taxpayer List (ATL). They could also potentially block these transactions.

The government wants to discourage non-compliance. However, a full removal of withholding tax exemptions is unlikely soon. This is due to concerns over immediate revenue loss. Doubling the tax rate on large cash withdrawals is the first impactful step. It aims to encourage more people to file their returns.

It is worth noting that the Finance Act 2023 had already reintroduced a 0.6% withholding tax on cash withdrawals above Rs 50,000 by non-ATL persons. This provision is still in effect and applies to all forms of withdrawals—branch, ATM, and credit card-based.