The Federal Board of Revenue (FBR) has put forward a proposal to increase the withholding tax on cash withdrawals by non-filers from 0.6% to 1.2%. This move is part of broader efforts to enhance tax collection for the fiscal year 2025-26 and to pressure non-compliant individuals into becoming part of the formal tax system.
According to insider sources, the government intends to make financial operations more difficult for individuals who are not on the Active Taxpayer List (ATL). By complicating access to banking services, authorities hope to incentivize tax compliance. There are also plans under consideration to eliminate the non-filer category altogether starting from July 1. This would mean individuals not registered with the tax system would be blocked from conducting formal financial transactions entirely.
The National Assembly’s Standing Committee on Finance and Revenue has already endorsed the “Tax Laws (Amendment) Bill 2024,” which introduces stricter measures for non-filers. These amendments are expected to be included in the upcoming Finance Bill for 2025-26.
One key aspect of the proposal is the sharing of income tax return data by the FBR with commercial banks. This would help financial institutions easily identify non-filers and apply the relevant taxes and restrictions more effectively.
Currently, under the Finance Act 2023, any cash withdrawal exceeding Rs50,000 in a single day by individuals not listed on the ATL is subject to a 0.6% advance adjustable tax. This tax is levied on the entire withdrawal amount—not just the excess above the threshold. The new proposal aims to double this rate, significantly raising the cost of banking for non-filers.
These steps are part of a broader strategy to widen the tax base and reduce tax evasion, aligning with the government’s fiscal goals and compliance targets for the upcoming financial year.
