In a major development, Pakistan’s Senate Standing Committee on Finance has proposed increasing the daily tax‑free cash withdrawal limit to Rs. 75,000. This move aims to ease financial pressure amid inflation while promoting formal banking. Below, we explore in depth what this means, why it matters, and how you can benefit.
The Senate Standing Committee recommended that the Federal Board of Revenue (FBR) set Rs. 75,000/day as the tax‑free cash withdrawal threshold.
Currently, non‑filers face a 0.6% withholding tax on withdrawals exceeding Rs. 50,000 per day, as per the FBR’s official withholding tax guidelines.
This recommendation is currently under review in the Finance Bill 2025‑26.
Rising inflation has significantly increased daily living costs. Many individuals and small businesses now require access to more than Rs. 50,000 a day, making the older limit outdated.
By raising the tax-free threshold, more people will be motivated to use banking channels rather than operate in cash. This aligns with the government’s goals of digital payment adoption in Pakistan , which aim to strengthen traceability and transparency.
This move is expected to reduce the size of the undocumented economy. Easier banking access could help reduce the widespread practice of holding large sums of cash outside of the banking system.
Filer Status | Daily Withdrawal Limit | Tax Rate |
|---|---|---|
Filer | Any amount | Exempt |
Non‑filer | Above Rs. 50,000 | 0.6% Withholding Tax |
To avoid these taxes, individuals can learn how to become a tax filer in Pakistan, which also opens access to numerous government and banking incentives.
Banking activity in Pakistan has been on a decline. Over-taxation and mistrust have led to increased cash reliance. The State Bank of Pakistan’s annual report shows declining trends in personal deposits, especially among lower-income groups.
Business associations and banking institutions have also been vocal about the need to raise the tax-free withdrawal limit. Political support across party lines suggests that the measure could be enacted in the 2025-26 fiscal year.
For Individuals:
For Businesses:
This aligns with guidance in our article on understanding withholding taxes in Pakistan, which outlines best practices for tax optimization.
While the change offers relief, there are some risks:
The FBR collects billions annually from withdrawal taxes. If the threshold is raised, they could experience a drop in revenue unless offset by better compliance. You can read more in IMF’s Pakistan fiscal reforms overview, which highlights the need to balance relief and revenue.
Critics argue that the new threshold could encourage hoarding, leading to decreased banking liquidity. However, increased formalization efforts may offset this.
Country | Tax Policy | Monitoring |
|---|---|---|
India | 2% TDS on withdrawals over Rs. 1 crore/year | PAN-linked bank scrutiny |
USA | No direct tax, but >$10,000 reported to IRS | Tracked under anti-money laws |
UK | No tax, but large withdrawals closely monitored | AML regulations & transaction flags |
Refer to the World Bank Financial Inclusion Database for more insights on global practices and financial participation.
Expert Opinions “Raising the tax‑free withdrawal limit is a positive step toward building trust in the banking system amid inflationary strains.”
— Ali Khizar, Economic Analyst
“The key challenge is balancing fiscal needs with public trust. A moderate increase may support long-term compliance.”
— Dr. Hafiz Pasha, Economist
If approved in the upcoming Federal Budget 2025–26, the following will occur:
To stay updated, we recommend tracking updates through Dawn’s Budget 2025–26 coverage.
The Senate’s proposal to raise the tax-free cash withdrawal limit to Rs. 75,000 is a timely reform aimed at enhancing economic flexibility and banking trust. Whether you're an individual, business owner, or policymaker, staying informed and adjusting financial practices accordingly is crucial as Pakistan's fiscal landscape evolves.
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