Taxation on Cash Withdrawals in Pakistan (2025)

In 2025, the taxation rules on cash withdrawals from banks in Pakistan have been clearly defined by the government, affecting both tax filers and non-filers. Understanding these regulations can help individuals minimize tax burdens and take advantage of financial benefits available to filers.

Tax on Cash Withdrawals

When withdrawing cash from a bank account, tax is applied if the amount exceeds PKR 50,000 in a single day. The tax rate for filers is 0.3%, whereas non-filers face a higher rate of 0.6%. For instance, if a filer withdraws PKR 100,000, the tax deduction would be PKR 150, while a non-filer would be charged PKR 300.

Threshold for Cash Withdrawal Tax

The Federal Board of Revenue (FBR) enforces this tax on daily withdrawals exceeding PKR 50,000. For example, if PKR 70,000 is withdrawn, the tax is levied only on the excess amount of PKR 20,000.

Why Different Tax Rates for Filers and Non-Filers?

The objective behind the difference in tax rates is to encourage individuals to become tax filers. Filers can adjust this tax against their annual tax liability, whereas non-filers cannot, making banking transactions more expensive for them.

Exemptions from Cash Withdrawal Tax

Some exemptions from cash withdrawal tax apply to specific entities, including:

• Charitable organizations
• Government institutions conducting official transactions
• Certain foreign missions operating in Pakistan

Impact on Filers vs. Non-Filers

For filers, the financial impact is significantly lower. A filer withdrawing PKR 1,000,000 in a month would pay PKR 3,000 in taxes, while a non-filer would pay PKR 6,000. Additionally, filers can offset the withdrawal tax against their annual tax liability, making it effectively cost-free. Conversely, non-filers face non-adjustable deductions, leading to higher financial costs.

Benefits of Becoming a Filer

Becoming a filer offers multiple advantages beyond lower tax rates on withdrawals. It provides benefits such as:

• Reduced taxes on bank profits, property transactions, and vehicle registrations
• Better banking and investment opportunities
• Improved financial stability
• Statistics on Tax Compliance

As of 2024, over 4 million individuals are on the Active Taxpayer List (ATL), showcasing an increase in tax compliance. Non-filers collectively paid an estimated PKR 10 billion in withdrawal taxes last year, reflecting the significant financial disadvantage of remaining a non-filer.

Conclusion:

The updated tax regulations highlight the importance of being a tax filer in Pakistan. With lower tax rates and the ability to adjust deductions, filers benefit from cost savings and financial privileges. Enrolling in the ATL is the most effective way to avoid unnecessary expenses and ensure better financial prospects.