The Federal Board of Revenue (FBR) has proposed increasing the withholding tax on cash withdrawals from banks by non-filers from 0.6% to 0.9% to generate an additional Rs 15-20 billion in revenue for 2024-25.
According to a news report, this proposal is part of the government’s strategy to penalise non-filers of income tax returns. The proposal has been discussed during ongoing talks between the FBR and the International Monetary Fund (IMF).
Currently, cash withdrawals exceeding Rs 50,000 in a single day by non-filers, through credit cards or ATMs, are subject to a 0.6% withholding tax.
The Finance Act 2023 reintroduced tax collection on cash withdrawals from Non-Active Taxpayer List (Non-ATL) persons by banks. Section 231AB requires every banking company to deduct an advance adjustable tax at 0.6% from individuals not listed in the Active Taxpayer List at the time of cash withdrawals exceeding Rs 50,000 in a single day. This provision also covers withdrawals made on credit cards or from ATMs.
If the total cash amount withdrawn in a single day exceeds Rs 50,000, the tax is deducted from the entire amount.
The withholding tax on cash withdrawals is adjustable against the tax liability of the individual for the tax year.
The tax is not deducted in cases of withdrawals made by the federal or provincial government, a foreign diplomat or diplomatic mission in Pakistan, or an individual who produces a certificate from the commissioner that their income is exempt during the tax year.
