The Federal Board of Revenue (FBR) has announced a 5% decrease in tax collected from profits on bank deposits for the fiscal year 2024-25, even as the country’s banking sector saw a surge in total deposits. The FBR, according to data from the Large Taxpayers Office (LTO) Karachi, collected Rs125 billion in income tax from this source, a drop from the Rs132 billion collected in the previous fiscal year.
This downward trend was particularly pronounced in June 2025, with a 13% year-on-year fall, as the FBR collected just Rs34 billion compared to Rs39 billion in June 2024.
SBP’s Monetary Easing Cited as Primary Cause
FBR officials attribute the decline in tax revenue to the State Bank of Pakistan’s (SBP) monetary policy. The SBP’s decision to sharply reduce its benchmark interest rate from 22% to 11% during the fiscal year directly lowered the returns on bank deposits. This, in turn, reduced the taxable profit for depositors, directly impacting the FBR’s tax intake.
The Deposit Paradox
Paradoxically, while tax revenue from deposit profits has fallen, total bank deposits have reached a record high. The total deposits in the country’s banking sector surged to Rs35.50 trillion by June 30, 2025. This includes a significant Rs2.78 trillion increase in June alone, representing an 8.5% rise from May’s total. This presents a unique challenge for the FBR, as it must now find a way to adapt its fiscal policies to this new economic landscape where deposit volumes are increasing while taxable returns are shrinking.
