Budget 2025-2026: Withholding tax rates on cash withdrawals from banks

The federal government is preparing to introduce major tax changes in the upcoming budget for fiscal year 2025-26, with a focus on increasing taxes on bank savings, cash withdrawals, and gasoline-powered vehicles.

As per officials familiar with the matter, the government is planning to raise the withholding tax on cash withdrawals by non-filers. The current tax rate of 0.6% may be doubled to 1.2%, and additional charges could apply for those withdrawing more than Rs 50,000 in a day.

The aim is to discourage cash-based transactions and bring more people into the formal tax system. Taxes on bank profits, savings plans, and capital gains may also increase under the new proposals, helping the government meet revenue goals and IMF requirements.

In another major move, the government is likely to introduce an 18% General Sales Tax (GST) on e-commerce transactions. This means online businesses and digital sellers will now be taxed at the same rate as traditional businesses.

These proposed measures are part of the government’s plan to increase tax collection, broaden the tax base, and stabilize the economy. The final details will be announced in the federal budget presentation.

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