Islamabad, June 13, 2025 — The Federal Board of Revenue (FBR) has projected an additional revenue of Rs56 billion following a significant change in the taxation of profits on bank deposits, as proposed in the Finance Bill 2025. These revisions, if approved by the National Assembly, will come into effect from July 1, 2025.
Under the new proposals, the FBR plans to increase the tax deduction rate on profit or yield earned by individuals from bank accounts or deposits maintained with banking companies and financial institutions. The current withholding tax rate of 15% is proposed to be raised to 20%, reflecting an effort by the FBR to align this source of income with the tax treatment of other income categories.
For individuals not appearing on the Active Taxpayers List (ATL), the tax rates are set to increase even more steeply. According to the proposed changes:
• Yield or profit from a banking company or financial institution:
o Existing rate: 35%
o Proposed rate: 40%
• Yield or profit in other cases:
o Existing rate: 35%
o Proposed rate: 30%
Additionally, an amendment has been made under Section 7B of the Income Tax Ordinance, which pertains to the final taxation of non-corporate individuals earning up to Rs5 million in profit on debt. While this category was previously taxed at a flat 15%, the revised law proposes to treat the 20% tax as a minimum tax liability, closing loopholes for underreporting and tax avoidance.
FBR sources explained that this move will harmonize the tax burden across various income sources. With other earnings already subjected to progressive rates ranging from 35% to 45%, increasing the tax on bank deposit profits ensures equitable treatment and helps reduce arbitrage.
This policy shift is a part of the broader strategy by the FBR to enhance tax compliance and plug revenue leakages. By treating the tax on bank profits as a minimum liability, the FBR aims to ensure that high-income earners contribute proportionately, especially those using low-tax avenues to shield large sums.
Overall, the FBR expects this amendment to yield a substantial revenue gain of Rs56 billion in the coming fiscal year, strengthening the government’s fiscal position.