Karachi, May 25, 2025 – In a surprising twist that’s left tax experts baffled, income tax collection from profit on bank deposits plunged by a staggering 37% in April 2025, compared to the same month last year—even as bank deposits soared to historic highs, crossing the Rs32 trillion mark for the first time in Pakistan’s financial history.
Official figures released by the Federal Board of Revenue (FBR) reveal that income tax collected on profit from deposits fell to just Rs4 billion in April 2025, down sharply from Rs6.5 billion in April 2024. This dramatic drop has raised serious concerns about the effectiveness of tax policy amid shifting monetary dynamics.
According to insiders within the FBR, major banks headquartered in Karachi reported the April tax data. The cause? A steep drop in interest rates, slashing the actual profit being earned on deposits. Over the past year, the State Bank of Pakistan (SBP) has aggressively cut its policy rate—from a record 22% to just 11%—in an attempt to kickstart economic growth. However, this monetary easing appears to have taken a serious toll on tax revenues tied to bank profits.
Ironically, the collapse in profit-based tax collection has occurred alongside a record-setting surge in deposits. As of the end of April 2025, total bank deposits hit a jaw-dropping Rs32.32 trillion, according to SBP data. That’s a year-on-year increase of 13.72%, up from Rs28.42 trillion in April 2024. Even on a month-to-month basis, deposits jumped by 2.18% from Rs31.63 trillion in March 2025.
“This paradox is alarming,” said a senior financial analyst. “We’re seeing massive inflows into the banking system, but because of low profit rates, the government is collecting less tax on these earnings. April’s data has exposed a growing gap between economic momentum and tax revenue.”
Despite the record April deposits, cumulative income tax collection on profit from bank accounts for the first ten months of the fiscal year (July–April 2024-25) has dropped marginally by 1%, from Rs86 billion to Rs85 billion.
As Pakistan’s financial institutions celebrate ballooning deposits, the FBR is under mounting pressure to find new ways to shore up revenue amid falling profit-based tax collections. April’s numbers could be the wake-up call policymakers didn’t see coming.