Karachi, August 5, 2025 – The Federal Board of Revenue (FBR) has reported a 5% decline in tax collection from profits on bank deposits during the fiscal year 2024-25, even as the country’s banking sector witnessed record-breaking deposit levels.
According to data released by the Large Taxpayers Office (LTO) Karachi, the FBR collected Rs125 billion in income tax from bank deposit profits, down from Rs132 billion collected in the previous fiscal year. This decline highlights growing concerns over tax revenue generation from the financial sector.
The downward trend worsened in June 2025, with a 13% year-on-year fall in collection under this head. The FBR received Rs34 billion in June, compared to Rs39 billion in the same month of 2024.
FBR officials have attributed this weakening in tax collection to the State Bank of Pakistan’s (SBP) sharp monetary easing. The SBP slashed its benchmark interest rate from 22% to 11% during the fiscal year, significantly reducing returns on bank deposits. As a result, the taxable profit for depositors declined, directly impacting tax revenue.
Paradoxically, despite falling returns, total bank deposits surged to a record Rs35.50 trillion by June 30, 2025. A remarkable Rs2.78 trillion increase occurred in June alone, reflecting an 8.5% rise over May’s Rs32.72 trillion.
This mismatch between growing deposit volumes and shrinking tax collection on deposit profits signals the urgent need for the FBR to reassess its fiscal policies to adapt to the evolving monetary landscape.