FBR proposes higher withholding tax on non-filers’ bank withdrawals

The Federal Board of Revenue (FBR) has proposed an increase in the withholding tax rate on cash withdrawals from banks by non-filers, from 0.6% to 1.2%, in a bid to raise additional revenue for the fiscal year 2025-26, according to a news report.  

As part of this plan, the withholding tax on cash withdrawals exceeding Rs 50,000 in a single day will be doubled to 1.2% for non-filers. This includes cash withdrawals made through credit cards or ATMs.

The government plans to impose financial restrictions on non-filers starting July 1, 2025. These moves are part of the government’s broader strategy to penalise individuals who fail to file their income tax returns.

Under the new proposal, non-filers, categorised as “ineligible persons,” will be barred from engaging in any financial transactions. This restriction will be included in the Tax Laws (Amendment) Bill, 2024, which was approved by the National Assembly Standing Committee on Finance and Revenue.

The government is considering a gradual implementation of these measures, taking into account the revenue implications of immediately abolishing all withholding taxes on non-filers. 

Previously, the Finance Act 2023 had reintroduced the tax on cash withdrawals by non-filers, stipulating that banks must deduct a 0.6% tax on any withdrawal over Rs 50,000 in a single day. This provision also applies to withdrawals made through credit cards or ATMs.