In a move aimed at boosting revenue and securing a crucial bailout package from the International Monetary Fund (IMF), the federal government is likely to raise the withholding tax on cash withdrawals by non-filers in the upcoming fiscal year 2024-25.
Federal Finance Minister Muhammad Aurangzeb poised to present the highly anticipated Budget 2024-25 today, June 12, in the National Assembly. The budget is expected to have a total outlay of Rs18 trillion.
Increased Tax on Cash Withdrawals
One of the key proposals in this budget is to increase the tax rate on cash withdrawals from the existing 0.6% to 0.9% for non-filers. This means that if the proposal approved, banks will deduct Rs 900 on a cash withdrawal of Rs100,000 starting from July 1, 2024. This measure is part of the government’s broader strategy to enhance tax compliance and generate additional revenue.
Rationale Behind the Tax Hike
The decision to hike the withholding tax is part of the government’s efforts to meet the IMF’s conditions for a bailout package. The increased tax on cash withdrawals expected to encourage more people to file their tax returns, thereby broadening the tax base and increasing the government’s revenue.
Implications for Non-Filers
Non-filers, who are already subject to a higher tax rate, will face an additional burden with this increase. The government hopes this will incentivize non-filers to become compliant taxpayers, reducing the reliance on cash transactions and increasing transparency in financial dealings.
The additional revenue generated from this tax hike is crucial for the government’s fiscal strategy. It will help bridge the budget deficit and ensure economic stability. By meeting the IMF’s requirements, the government aims to secure the necessary funds to support economic reforms and development projects.
As Finance Minister Muhammad Aurangzeb presents the Budget 2024-25, the proposed increase in withholding tax on cash withdrawals for non-filers is a significant step towards enhancing revenue collection and securing international financial support. This measure underscores the government’s commitment to fiscal responsibility and economic reform.
, the federal government is likely to raise the withholding tax on cash withdrawals by non-filers in the upcoming fiscal year 2024-25.){kind=link}