In a significant move aimed at enhancing financial compliance and broadening the tax base, the federal government has revised the withholding tax on cash withdrawals from banks by non-filers. The threshold for this tax has been increased from Rs50,000 to Rs75,000, while the tax rate has been adjusted upward from 0.6 percent to 0.8 percent per transaction. These changes are part of the Finance Bill 2025-26.
Federal Board of Revenue (FBR) Chairman, Rashid Mahmood Langrial, confirmed this development during a detailed session of the National Assembly Standing Committee on Finance held at Parliament House on Friday. The session focused on reviewing key proposals within the Finance Bill for the upcoming fiscal year.
Clarification on Cash Withdrawal Tax Rate
Addressing a previous misunderstanding, Chairman Langrial clarified that an earlier announcement during the budget speech erroneously mentioned a one percent cash withdrawal tax. “The announcement of one percent was a mistake; the correct rate is 0.8 percent,” he stated to the media following the committee meeting.
During the committee discussions, Naveed Qamar, who chairs the Finance Committee, initially suggested raising the Rs50,000 limit to Rs100,000, deeming the existing limit too low. However, following deliberations, a consensus was reached between the FBR and the committee to set the revised threshold at Rs75,000. This adjustment in both the limit and the rate is primarily intended to enhance documentation within the economy and discourage large cash withdrawal transactions by non-filers, which often remain outside the formal tax system.
The FBR Chairman also highlighted that all proposed changes related to banking taxation were formulated in close consultation with the State Bank of Pakistan (SBP), ensuring a coordinated approach to financial reforms.
