FBR mulls doubling cash withdrawal tax for non-filers in Budget 2025

Currently, non-filers are taxed at 0.6% on cash withdrawals exceeding Rs50,000 per day. Under the new proposal, this rate may be increased to 1% or even 1.2%. Meanwhile, filers remain exempt from any such tax on cash withdrawals.

The Federal Board of Revenue (FBR) is considering a proposal to double the tax on cash withdrawals from banks for non-filers in the upcoming Budget 2025. The move is part of a broader plan to discourage informal economic activity and bring more people into the tax net.

According to top officials, the FBR is focused on penalizing those who remain outside the formal tax system, especially as the category of ‘non-filers’ may be abolished in name. However, alternative enforcement mechanisms will be introduced to maintain pressure on those who refuse to register with the tax authorities.

The measure is also expected to help offset the revenue impact of planned tax relief for the salaried class. In a presentation to the International Monetary Fund (IMF), the government shared that it intends to lower the tax rate for the lowest income slab (Rs600,001 to Rs1.2 million annually) from 5% to 1%, with a 2% to 2.5% reduction proposed for other slabs. The maximum tax rate for salaried individuals is expected to come down from 35% to 32.5%.

To cover the Rs50–55 billion cost of this relief, the government is also exploring other revenue-enhancing options, including a 2% hike in the tax rate on interest income.

The FBR Chairman, Rashid Mehmood Langrial, has reportedly advocated for promoting digital transactions and reducing reliance on cash, a vision that aligns with IMF’s push to curb the informal economy. The tax hike on cash withdrawals is viewed as a step toward that goal.

Budget 2025 is expected to be presented in the second week of June.