Karachi, April 25, 2025 – The Federal Board of Revenue (FBR) has reported a notable 28% decrease in tax collection from cash withdrawals during the month of March 2025, highlighting a major shift in the behavior of banking customers.
The Large Taxpayers Office (LTO) Karachi revealed that the tax revenue collected from cash withdrawals fell to Rs992 million, compared to Rs1.4 billion in the same month last year.
According to sources within the FBR, this decline is largely attributed to enhanced financial documentation and the growing preference for online transfers and digital transactions over physical cash withdrawals. As the public becomes more inclined towards modern banking methods, the reliance on cash continues to shrink.
The tax on cash withdrawals was reintroduced through the Finance Act, 2023 by inserting Section 231AB into the Income Tax Ordinance, 2001. This step was taken to encourage documentation of the economy and place greater compliance pressure on non-filers — those individuals who have taxable income but are not listed as active taxpayers.
Under this law, every banking company is now required to deduct an advance, adjustable tax at a rate of 0.6% on the total amount of cash withdrawals exceeding Rs50,000 per day, but only from those not appearing in the Active Taxpayers List (ATL). The provision clearly states that the Rs50,000 threshold is cumulative for all cash withdrawals made in a single day.
Interestingly, while this measure was removed in the Finance Act of 2021, it was revived two years later in an effort to reinforce revenue generation and curb undocumented economic activity. Despite its reintroduction, the overall tax collection from cash withdrawals during the first nine months of the current fiscal year (July 2024 to March 2025) also recorded a 13% year-on-year drop — falling to Rs7.55 billion from Rs8.70 billion during the same period last year.
This downward trend signals an evolving financial landscape in Pakistan, where increasing digitization and reduced dependency on cash could reshape future taxation policies and revenue mechanisms.