Islamabad, June 14, 2025 – In a significant move to tighten financial compliance and widen the tax base, the government has announced an increase in the limit for the imposition of higher withholding tax on cash withdrawal from banks by non-filers.
Under the Finance Bill 2025-26, the threshold has been revised upward from Rs50,000 to Rs75,000, while the tax rate has also been raised from 0.6 percent to 0.8 percent per transaction.
This development was shared by Chairman of the Federal Board of Revenue (FBR), Rashid Mahmood Langrial, during a detailed session of the National Assembly Standing Committee on Finance held at Parliament House on Friday. The session was focused on reviewing key proposals in the Finance Bill for the fiscal year 2025-26.
Langrial clarified that although a one percent cash withdrawal tax was erroneously mentioned during the budget speech, the actual proposed rate is 0.8 percent. “The announcement of one percent was a mistake; the correct rate is 0.8 percent,” he stated while addressing the media after the meeting.
Naveed Qamar, who chairs the Finance Committee, pointed out that the Rs50,000 limit was too low and suggested that it should be increased to Rs100,000. However, a consensus was reached between the FBR and the committee to fix the revised limit at Rs75,000. The updated rate and limit aim to enhance documentation and discourage large cash withdrawal transactions by non-filers, which often escape the tax net.
This adjustment in cash withdrawal taxation is part of a broader reform strategy to increase revenue while encouraging digital transactions. Langrial also emphasized that all proposed changes in banking taxation were made in consultation with the State Bank of Pakistan (SBP).
In addition to the cash withdrawal provisions, the government also addressed tax reforms for salaried individuals. Minister of State for Finance Bilal Azhar Kayani announced reductions in tax rates for income up to Rs3.2 million. However, due to fiscal constraints, a revised tax rate of 2.5 percent was approved for the Rs600,000 to Rs1.2 million income slab, despite earlier proposing a one percent rate.
The Finance Bill 2025-26 also brings modest relief for compliant corporations, with a slight reduction in super tax rates under Section 4C of the Income Tax Ordinance for high-income slabs.
The government believes that revising the cash withdrawal limits and rates will promote transparency in the financial system and strengthen the country’s tax structure.