Budget 2025: Non-Filers to Pay Rs1,200 Tax on Rs1 Lakh Withdrawals

As Budget 2025 approaches, the government is weighing a proposal to increase the withholding tax on cash withdrawals by non-filers in an effort to enhance tax collection and broaden the tax base.

Currently, individuals who are non-filers and withdraw over Rs50,000 in cash through ATMs or credit cards are charged a 0.6% withholding tax. However, under the new proposal, this rate could be doubled to 1.2%, meaning a Rs1 lakh withdrawal would be taxed at Rs1,200 instead of Rs600.

“This measure is part of the government’s efforts to widen tax base and increase revenue from non-filers, who are currently subject to fewer tax obligations.” Officials believe the proposed hike could generate Rs15 to 20 billion in additional revenue during the fiscal year 2025-26.

“This tax was reinstated by the Finance Act 2023 and applies to the total withdrawal amount if it exceeds the threshold.”

Sources say the plan primarily targets unregistered taxpayers, but it could also affect routine banking behavior and increase transaction costs for many individuals.

The Sharif-led government is also considering abolishing the non-filer category altogether from July 1, 2025. “Sharif led government plans removing category of non-filers, preventing those who don’t meet tax requirements from conducting financial transactions starting July 1, 2025.”

Furthermore, the National Assembly has already passed the Tax Laws (Amendment) Bill 2024. “National Assembly also approved Tax Laws (Amendment) Bill 2024 to enforce these restrictions through the Finance Bill 2025-26.”

The final decision on the proposed tax hike will be revealed in the upcoming budget announcement.