Govt to raise withholding tax threshold for non-filers’ bank withdrawals

ISLAMABAD: Pakistan plans to raise the threshold for charging a higher withholding tax on bank cash withdrawals by non-filers, as part of broader fiscal reforms under the Finance Bill 2025-26. 

The Federal Board of Revenue (FBR) informed lawmakers on Friday that the limit for applying the enhanced withholding tax rate will be increased from Rs50,000 to Rs75,000 per day.  

The rate itself will also go up from 0.6 per cent to 0.8 per cent, reversing an earlier misstatement in the budget speech that mistakenly cited the rate as one per cent. 

FBR Chairman Rashid Mahmood Langrial disclosed the changes during a meeting of the National Assembly’s Standing Committee on Finance at Parliament House. Committee Chairman Naveed Qamar had suggested increasing the threshold to Rs100,000, but a consensus was reached at Rs75,000. 

Langrial clarified to reporters after the meeting that the new rate was misreported in the budget address. “The proposed rate is 0.8 per cent, not one per cent as incorrectly mentioned earlier,” he said. 

The Finance Bill also proposes changes to tax rates for salaried individuals. Minister of State for Finance Bilal Azhar Kayani said income tax slabs for salaried persons have been revised to provide relief to lower and middle-income groups. 

Initially, the government proposed a one per cent tax for annual income between Rs600,000 and Rs1.2 million. However, the federal cabinet later approved a higher rate of 2.5 per cent for this bracket. Kayani said the revision was made due to fiscal constraints following a 10 per cent pay increase for federal employees. 

On banking taxation, Langrial said all proposed amendments were made in consultation with the State Bank of Pakistan. The bill introduces enhanced disclosure requirements for banks to ensure a fair assessment of taxable income.  

He said earlier preferential tax treatment for banks has been reassessed. 

Additionally, the super tax under Section 4C of the Income Tax Ordinance will be marginally reduced by 0.5 percentage points for companies earning between Rs200 million and Rs500 million, signalling the government’s intent to gradually lower the tax burden on compliant corporate entities. 

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