The Senate Standing Committee on Finance on Wednesday approved a proposal to increase the withholding tax (WHT) on cash withdrawals by non-filers to a rate of 1 percent for the upcoming fiscal year. This decision came after a strong recommendation from Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, who advocated for the higher rate.
The newly approved rate of 1 percent is a notable increase from the earlier proposed rate of 0.8 percent in the Finance Bill 2025, and a significant jump from the existing rate of 0.6 percent. This move underscores the FBR’s aggressive stance on bringing undocumented transactions into the tax net and encouraging individuals to become active filers.
Targeting Undocumented Cash Transactions
The increase in withholding tax on cash withdrawals by non-filers is a key measure aimed at disincentivizing large cash transactions outside the formal banking channels. By making cash withdrawals more expensive for those not actively contributing to the tax system, the FBR hopes to compel them towards formal financial behavior and ultimately, tax compliance.
It is important to note that the existing provision, which was also retained, covers cash withdrawals exceeding Rs. 50,000 made by non-filers in a single day. This includes withdrawals made through credit cards or from Automated Teller Machines (ATMs), ensuring a broad application across various banking channels.
FBR’s Push for Tax Base Expansion
FBR Chairman Rashid Mahmood Langrial’s successful advocacy for the higher rate before the Senate committee highlights the tax body’s persistent efforts to expand Pakistan’s narrow tax base. The FBR has consistently argued that non-filers contribute disproportionately less to the national exchequer while enjoying benefits from the formal economy. Measures like increased withholding tax on cash withdrawals are designed to exert financial pressure on this segment to file their tax returns.
This approval by the Senate Standing Committee on Finance reflects parliamentary support for the FBR’s initiatives to enhance revenue collection and promote a more documented economy. The new rate will come into effect from the next fiscal year, impacting all non-filers making significant cash withdrawals.
