Karachi, June 11, 2025 – The Finance Bill 2025 has introduced a major increase in income tax for individuals who are not on the Active Taxpayers List (ATL), targeting the profit they earn from bank deposits.
Non-filers will now be subject to a steep 40% income tax on any profit earned from deposits held with banks and financial institutions.
According to a commentary by PwC A.F. Ferguson & Co., this change is part of the government’s strategy to encourage tax compliance and widen the tax net. Previously, the withholding tax rate on such profit was 35% for non-filers, but the Finance Bill now proposes raising it to 40% for profit generated from bank deposits or accounts with financial institutions.
For filers—those who appear on the ATL—the withholding tax on profit from banks has also been revised. The standard rate of 15% has been proposed to increase to 20% for profit received from deposits maintained with a banking company or financial institution.
However, when the profit or return is earned from sources other than banks or financial institutions, such as private debt instruments or bonds, the tax rate will remain at 15% for filers.
The Finance Bill 2025 also includes an amendment to Section 7B of the Income Tax Ordinance, which governs the final taxation for non-corporate individuals earning up to Rs 5 million in profit from debt instruments. The aim is to align these rates with the broader tax structure and penalize non-compliant taxpayers.
Here’s a summary of the proposed new tax rates for non-filers:
• If the profit is earned from a bank or financial institution, the tax rate will be 40%.
• If the profit is earned from other sources (non-bank entities), the rate will be reduced to 30%.
This move sends a strong signal from the government that staying outside the formal tax system will come at a significant financial cost. The sharp rise in tax on bank deposit profit for non-filers is likely to push more individuals toward becoming active taxpayers and ensure better documentation of financial activities.