Budget 2025-26: Tax Hikes Expected on Bank Deposits, Savings, Cash Withdrawals for Non-Filers

The upcoming federal budget for the fiscal year 2025-26 is expected to introduce notable tax hikes on bank deposits, savings instruments, and cash withdrawals by non-filers, alongside a substantial increase in development expenditures.

Sources close to the matter revealed that authorities are working on several tax measures, including a significant hike in the withholding tax on cash withdrawals by non-filers. The current rate of 0.6% is likely to be doubled to 1.2%. Additionally, a new tax bracket is being considered for daily cash withdrawals exceeding Rs50,000, aimed at reducing large cash transactions and encouraging formal economic documentation.

Tax reforms may also affect the automotive sector, with the General Sales Tax (GST) on locally assembled vehicles—particularly those with engine sizes under 800cc—expected to rise from 12.5% to 18%, aligning them with broader GST rates.

Other proposals under review include levies on petrol and diesel vehicles, revised taxes on capital gains and profits, and possible changes to the super tax. Notably, a cut in the super tax is being considered to reduce the financial burden on major industries and stimulate investment.

Development Spending on Rise

Despite tightening the tax framework, the federal government is planning a major boost in development funding, with an allocation exceeding Rs1,000 billion for the upcoming fiscal year. Of this amount, Rs270 billion will be sourced from foreign financing.

Provincial governments are also ramping up their development budgets. Punjab has announced a record Rs1,190 billion development plan, the highest among provinces. Sindh has allocated Rs887 billion, followed by Khyber Pakhtunkhwa with Rs440 billion, and Balochistan with Rs280 billion. Combined, the provinces are projected to borrow Rs802 billion from international lenders to support these initiatives. This marks a Rs609 billion increase in provincial development spending compared to the current year.

Budget 2025-26 Goals

To signal a turnaround in economic performance, the government is expected to set a GDP growth target of 4.2% for FY2025, up from this year’s 2.68% growth, which fell short of the 3.6% goal. The inflation target is likely to be set at 7.5%, aiming to bring relief from the current double-digit inflation that has impacted household finances.

Still under final review, the budget proposals aim to balance revenue generation, economic stability, and development, with the final budget set to be presented later this month.

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