Pakistan Government Increases Withholding Tax for Non-Filers, Raises Limit to 75,000 Rupees

In a recent move aimed at increasing tax revenue, the Pakistani government has raised the withholding tax rate on cash withdrawals by non-filers from banks. The rate has been increased from 0.6% to 0.8%, while the exemption limit has been raised from 50,000 rupees to 75,000 rupees.

According to the Chairman of the Federal Board of Revenue (FBR), Rashid Mehmood Langrial, who addressed the National Assembly’s Standing Committee on Finance, the original tax rate mentioned in the budget speech was incorrectly stated as 1%. However, the correct proposed rate is 0.8%. During the session, Committee Chairman Naveed Qamar suggested that the exemption limit of 50,000 rupees was too low and recommended an increase to at least 100,000 rupees. After discussions, both the committee and FBR agreed to raise the limit to 75,000 rupees.

In addition, Minister of State for Finance, Bilal Azhar Kiyani, shared details about the government’s proposed tax relief measures for salaried individuals in the Finance Bill 2025-26. The new proposal includes tax reductions across all income slabs, particularly benefitting individuals with annual earnings up to 3.2 million rupees. Notably, the income tax rate for those earning between 600,000 and 1.2 million rupees annually has been revised upward from 1% to 2.5%. Kiyani explained that the increase was necessary due to the government’s decision to raise salaries of public servants by 10%, leading to a shortfall in financial resources.

Rashid Langrial further clarified that changes to the banking sector’s tax laws had been made with the approval of the State Bank of Pakistan. The revised disclosure-based method for estimating the income of banking companies aims to ensure the accurate determination of taxes.

Finally, Langrial mentioned that the super tax rate for corporate entities has been slightly reduced. The tax rate for companies with annual earnings between 200 million and 500 million rupees has been decreased by 0.5%, reflecting the government’s intention to ease the tax burden on the corporate sector.