The Federal Board of Revenue (FBR) has recommended increasing the withholding tax rate on cash withdrawals for non-filers from 0.6% to 1.2%, as part of the proposed fiscal measures for the 2025-26 budget. This move aims to generate additional tax revenue and push non-filers into the tax net by making financial transactions more restrictive for those who do not file income tax returns.
Federal Budget Presentation Likely to be Postponed Again
Currently, non-filers are charged a 0.6% tax on withdrawals exceeding Rs. 50,000 per day, whether through ATMs or credit cards. If approved, the new 1.2% rate will significantly increase the cost of large cash transactions for non-compliant individuals. Sources indicate that the government is also considering eliminating the non-filer category entirely from July 1, 2025, which would bar them from conducting major financial transactions unless they regularize their tax status.
Stricter Measures to Expand Withholding Tax Net
The National Assembly’s Standing Committee on Finance and Revenue has approved the Tax Laws (Amendment) Bill 2024, which includes stricter regulations on non-filers. These measures will be implemented through the upcoming federal budget (2025-26). Additionally, the FBR plans to share income tax return data with banks to improve the identification of non-filers and ensure compliance.
The proposed hike in withholding tax is part of a broader strategy to discourage tax evasion and encourage documentation of the economy. However, critics argue that such measures may burden small businesses and individuals who face difficulties in tax filing due to complex procedures. The government maintains that these steps are necessary to increase revenue and reduce the informal economy, ultimately leading to a fairer taxation system.
If implemented, the new policy could force millions of non-filers to either start filing returns or face higher costs on their financial transactions. The move reflects the authorities’ push to broaden the tax base and reduce reliance on indirect taxes, which disproportionately affect lower-income groups.
