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Recent reports claiming that the federal government has begun collecting taxes on all types of bank transactions from both filers and non-filers starting July 1, 2025, have caused confusion and concern among the public. However, official sources have now clarified that these claims are inaccurate and misleading.
Withholding Tax Applies Only to Non-Filers on Large Cash Withdrawals
According to the updated tax regime effective from July 1, 2025, the only change made by the federal government pertains to withholding tax (WHT) on daily cash withdrawals from banks exceeding Rs. 50,000.
This change does not affect all bank transactions. It applies exclusively to non-filers, who are individuals not listed on the Active Taxpayers List (ATL) maintained by the Federal Board of Revenue (FBR).
The withholding tax rate for non-filers has been increased from 0.6% to 0.8% on daily cash withdrawals that exceed Rs. 50,000. This tax is automatically deducted by banks at the time of withdrawal and is meant to encourage tax compliance.
Filers Completely Exempt from Withholding Tax on Withdrawals
In contrast, individuals and entities who are filers — meaning they regularly submit their income tax returns and are included in the ATL — are entirely exempt from this withholding tax.
PKR Rebounds to 283.86 Against Dollar
This exemption applies regardless of whether the filer withdraws cash via:
- ATM
- Bank branch
- Any other official channel
Even if a filer withdraws cash exceeding Rs. 50,000 in a single day, no withholding tax will be charged to them.
No Tax on Non-Cash Transactions
Government officials have reiterated that no taxes are being imposed on other forms of banking transactions. The withholding tax applies solely to cash withdrawals, and even then, only for non-filers.
The following transaction types are not affected by this regulation:
- Online fund transfers
- Interbank transfers
- Cheque transactions
- Mobile wallet transactions
- Deposits into bank accounts
Therefore, the claim that taxes are being collected on “all types of bank transactions” is completely false. The tax policy change is narrowly targeted and is not intended to burden the wider banking public, especially those who are compliant with tax regulations.
Purpose Behind the Revision
This policy update is part of the government’s broader strategy to increase documentation of the economy and encourage tax compliance. By raising the tax rate for non-filers, the government aims to bring more people into the formal tax net and discourage cash-based transactions among those not paying taxes.
The withholding tax serves a dual purpose:
- Acts as a deterrent for remaining outside the tax system.
- Generates revenue from individuals and businesses that are operating informally.
