Islamabad: The Federal Board of Revenue (FBR) is considering doubling the withholding tax rate on bank cash withdrawals by non-filers—from the current 0.6% to 1.2%—as part of its strategy to penalise those who do not file income tax returns.
Sources revealed that the proposal is among a series of measures being drafted for the 2025–26 fiscal year to generate additional revenue and push more individuals into the tax net. The move is in line with the government’s broader policy to gradually eliminate the concept of “non-filers” by imposing strict financial restrictions starting July 1, 2025.
As per the plan, individuals deemed “ineligible” due to non-filing status would be barred from carrying out any financial transactions. This is being formalised through the Finance Bill 2025–26, which aims to impose sweeping limitations on the economic activities of non-filers.
Currently, a 0.6% withholding tax is deducted from non-filers who withdraw over Rs50,000 in cash from banks in a single day, including transactions made via credit cards and ATMs. If the new proposal is approved, this rate will double to 1.2%, significantly increasing the cost of large cash withdrawals for non-compliant individuals.
Officials indicated that while the government intends to phase out certain withholding taxes in the future, immediate fiscal pressures mean that penalties on non-filers must remain in place, or even be enhanced, to safeguard revenue collection.
Additionally, the FBR will begin sharing income tax return data with banks to ensure more robust compliance and detection of non-filers engaging in financial activities.
The move comes amid broader tax reforms aimed at expanding the country’s narrow tax base and discouraging undocumented financial practices.
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