Islamabad, 31 May 2025: Deductions on ATM Withdrawals The federal government is preparing to tighten its grip on non-taxpayers by proposing a sharp rise in withholding tax on cash withdrawals from banks, aiming to raise an additional Rs. 15–20 billion in the upcoming fiscal year.
Sources familiar with the matter revealed that authorities are considering a proposal to double the current deduction from 0.6% to 1.2% on daily cash withdrawals exceeding Rs. 50,000 made by individuals not listed on the Active Taxpayer List (ATL).
Plan to Target Non-Filers Gains Ground
Under the existing framework, cash withdrawn through ATMs or credit cards by non-filers is already subject to a 0.6% tax if the amount crosses the Rs. 50,000 daily limit. Officials have now suggested that Deductions on ATM Withdrawals could be raised as part of the 2025-26 federal budget strategy.
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This initiative follows the reintroduction of withholding tax under Section 231AB of the Finance Act 2023, which made it compulsory for banks to deduct adjustable tax on cash withdrawals made by non-ATL individuals.
Legislation Covers Banks and Cards Alike
The tax measure applies across all banking channels, including over-the-counter transactions, ATM withdrawals, and credit card-based cash advances. It aims to push non-filers toward formal registration and compliance with tax regulations.
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Officials noted that this increased levy would apply only to aggregate daily withdrawals exceeding the prescribed threshold and would continue to be treated as adjustable advance tax.
Deductions on ATM Withdrawals, according to insiders, are viewed as an effective tool to enhance tax compliance and reduce the undocumented flow of cash in the economy.
