FBR Proposes Doubling Withholding Tax on Non-Filers’ Cash Withdrawals
The Federal Board of Revenue (FBR) has proposed a significant increase in the withholding tax rate on cash withdrawals from banks by non-filers, aiming to boost revenue for the fiscal year 2025-26. Under the new proposal, the tax on cash withdrawals exceeding Rs 50,000 in a single day will jump from 0.6% to 1.2% for non-filers. This new rate will apply to all cash withdrawals, including those made via credit cards or ATMs.
These changes are part of the government’s broader strategy to penalize individuals who do not file their income tax returns. Starting July 1, 2025, the government plans to impose tighter financial restrictions on non-filers. The new proposal, which is part of the Tax Laws (Amendment) Bill, 2024, categorizes non-filers as “ineligible persons” and will bar them from engaging in various financial transactions. This bill has already been approved by the National Assembly Standing Committee on Finance and Revenue.
The government is considering a phased approach to implementing these measures, taking into account the potential revenue impact of immediately removing all withholding tax exemptions for non-filers. This isn’t the first time such a measure has been in place; the Finance Act 2023 had previously reintroduced a 0.6% tax on cash withdrawals over Rs 50,000 by non-filers.
