Islamabad, October 4, 2025 – The Federal Board of Revenue (FBR) has reported a noticeable decline in tax collected on banking cash transactions, with withholding tax collection on cash withdrawal dropping by 7% during fiscal year 2024-25.
According to official data, the FBR managed to collect Rs30 billion in withholding tax on cash withdrawal, compared to Rs32.25 billion in the previous fiscal year. This shortfall highlights challenges in expanding the tax net, particularly among non-filers who are the primary target of this levy.
The tax is collected under Section 231AB of the Income Tax Ordinance, 2001, which was reintroduced through the Finance Act, 2023, in order to generate revenue from non-filers. Under this provision, every banking company is required to deduct adjustable advance tax at the rate of 0.6% on cash withdrawal from individuals not listed as active taxpayers. The deduction applies when the aggregate cash withdrawn in a single day exceeds Rs50,000.
Authorities explained that the Rs50,000 threshold is cumulative, meaning multiple transactions in one day are combined to determine tax applicability. Despite this mechanism, analysts suggest that improved compliance and efforts by individuals to minimize withdrawal volumes could be contributing to the dip in revenue.
Tax experts also noted that increased use of digital payments and mobile banking may have reduced reliance on heavy cash transactions, thereby impacting the base for this withholding tax. The FBR, however, remains committed to monitoring trends and strengthening measures to ensure fair tax contribution from all sectors of the economy.