Government Plans to Double Withholding Tax on Non-Filers’ Bank Withdrawals

The government is planning to increase financial pressure on non-filers in the upcoming fiscal year by doubling the withholding tax on their cash withdrawals from banks. The proposed change aims to generate an additional Rs. 15–20 billion in revenue during FY 2025–26, according to official sources.

Under the current system, a 0.6 percent withholding tax is applied on daily cash withdrawals exceeding Rs. 50,000 by non-filers, including withdrawals made via credit cards and ATMs. However, the new proposal under consideration seeks to raise this rate to 1.2 percent.

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The Finance Act 2023 had reinstated tax collection on cash withdrawals by individuals not listed on the Active Taxpayer List (ATL). According to Section 231AB, banks must deduct an adjustable advance tax of 0.6 percent on the aggregate amount of cash withdrawn by non-ATL persons if it exceeds Rs. 50,000 in a single day. This also applies to transactions made through credit cards or ATMs.

The proposed hike would further tighten compliance and encourage non-filers to register as active taxpayers to avoid higher tax burdens.