Withholding tax on cash withdrawals set at 0.8pc

Islamabad: The National Assembly’s Standing Committee on Finance and Revenue has approved raising the minimum daily cash withdrawal limit from Rs50,000 to Rs75,000.

The standing committee rejected a separate proposal to impose an additional 2 percent sales tax on online purchases, indicating resistance to new digital taxes amid growing e-commerce activity.

The meeting, chaired by Member of National Assembly (MNA) Naveed Qamar, also approved increasing the withholding tax rate on cash withdrawals from 0.6 percent to 0.8 percent. However, a proposal to increase the tax rate on profits earned by banks on loans from 15 percent to 20 percent was rejected.

In other decisions, the committee endorsed the government’s proposal to increase tax on services provided by digital platforms like Google and YouTube from 10 percent to 15 percent, while a separate proposal to impose a 4 percent tax on rent received from commercial properties was deferred for further consideration.

The committee also rejected a controversial proposal to make all purchases and sales of more than Rs200,000 through banking channels, a move critics said would burden small traders. Meanwhile, the committee approved an amendment that would remove the possibility of adjusting rental income against business losses.

The committee also strongly opposed a proposal to phase out tax exemptions for erstwhile FATA and PATA.

Calling the move an ‘economic murder’ for small businesses in the region, Naveed Qamar urged the Federal Board of Revenue (FBR) to reconsider the decision, directing it to find ways to provide fiscal relief tailored to local circumstances to ensure job security and economic recovery in underdeveloped areas.

A major part of the committee meeting was spent discussing the various tax rates proposed for low-income salaried individuals.

Finance Minister Muhammad Aurangzeb had announced a 2.5 percent tax for those earning between Rs0.6 million and Rs1.2 million annually in his budget speech, but the rate was shown as 1 percent in the Finance Bill 2025.

FBR Chairman Rashid Mahmood Langrial told the committee that the federal cabinet has withdrawn the proposed tax relief for low-income earners.

Newly appointed Minister of State for Finance, Bilal Azhar Kayani, defended the government’s decision, saying that the salaries of government employees have been increased by 10 percent, which is more than the earlier proposal of 6 percent.

However, members pointed out that the salary increase will only benefit government employees, while the tax increase will affect private sector employees, who are deprived of the salary increase.

Naveed Qamar expressed reservations over the cabinet’s decision to increase the tax burden on low-income employees and questioned its legitimacy.