FBR Proposes Doubling Withholding Tax on Cash Withdrawals by Non-Filers to 1.2%

In a significant move aimed at expanding the tax net, the Federal Board of Revenue (FBR) has proposed increasing the withholding tax on cash withdrawals by non-filers from 0.6% to 1.2%. This proposal is part of the upcoming Finance Bill for the fiscal year 2025-26 and is designed to generate additional tax revenue.

According to sources cited by *Business Recorder*, the government’s objective is to tighten financial operations for individuals who do not file income tax returns, thereby pressuring them to become tax-compliant. Reportedly, the government is also considering eliminating the “non-filer” category altogether starting from July 1, 2025. Under the proposed changes, individuals not registered as tax filers may be barred from conducting any form of financial transaction.

The National Assembly’s Standing Committee on Finance and Revenue has already approved the report on the “Tax Laws (Amendment) Bill 2024,” which outlines stringent restrictions on economic activities of non-filers. These measures will be formally enacted through the forthcoming Finance Bill 2025-26.

Furthermore, FBR is set to begin sharing income tax return data with banks to facilitate the identification of non-filers.

At present, non-filers are subject to a 0.6% withholding tax if they withdraw more than Rs. 50,000 in cash in a single day—whether via ATM or through credit card channels. Under the new proposal, this tax rate would be doubled to 1.2%, intensifying the financial implications for non-compliant individuals.