Withholding Tax on Cash Withdrawal in Pakistan

How Section 231AB withholding tax on cash withdrawal works

Section 231AB was introduced to push more taxpayers onto the Active Taxpayer List by making cash transactions more expensive for those who don't file returns. The rule is simple: every banking company in Pakistan must deduct advance tax at 0.8% on cash withdrawals exceeding Rs. 50,000 in aggregate per dayby persons not appearing on the FBR's Active Taxpayer List (ATL).

The Rs. 50,000 threshold is calculated across all accounts of the same Non-ATL account holder at the same bank. So you cannot avoid the tax by making multiple smaller withdrawals on the same day from different branches or accounts at the same institution.

Who pays withholding tax on cash withdrawal?

The tax applies only to Non-ATL persons — individuals, AOPs, or companies whose name does not appear on the latest Active Taxpayer List published by the FBR. If your name is on the ATL, banks do not deduct any withholding tax on your cash withdrawals, regardless of amount.

This is by design. The FBR uses Section 231AB as an enforcement tool — paying 0.8% tax on every cash withdrawal is meant to make filing your return obviously cheaper than not filing.

Worked example: cost of staying off the ATL

Imagine you withdraw Rs. 200,000 in cash from your bank account in a single day:

• If you're on the ATL: No tax deducted. You receive Rs. 200,000.
• If you're Non-ATL: Tax = (Rs. 200,000 − Rs. 50,000) × 0.8% = Rs. 1,200. You receive Rs. 198,800.

On its own, Rs. 1,200 doesn't feel like much. But this is just one section of the Tax Ordinance. Non-ATL persons also pay roughly double the rate on banking transactions, vehicle registration, property purchase, dividends, and most other inflows. Across a year, the cumulative penalty for staying off the ATL routinely runs into tens or hundreds of thousands of rupees.

How to stop paying withholding tax on cash withdrawal

The fix is to get on — and stay on — the Active Taxpayer List:

1. File your annual income tax return on the FBR IRIS portal before the deadline (usually 30 September).
2. Pay any tax due, including the late-filer surcharge if applicable.
3. Verify your ATL status after filing — see our NTN verification guide for the FBR portal and SMS lookup steps.

Once you're on the ATL, the 0.8% withholding tax on cash withdrawal stops being deducted. You also save substantially on every other withholding rate covered in our full withholding tax rates table.

Is the 0.8% tax adjustable in my income tax return?

Yes. The withholding tax deducted under Section 231AB is adjustable against your final income tax liability. The amount appears automatically in the Withholding Tax Credit statement under your IRIS portal account once your bank deposits it with the FBR.

When you file your annual return, claim the full deducted amount as a credit. If your final liability is less than the credits, the excess is refundable. In practice, however, the more cost-effective path is to avoid the deduction altogether by being on the ATL.

What banks must do under Section 231AB

Every banking company in Pakistan acts as a withholding agent. They must:

• Check the ATL status of every account holder before disbursing cash above the threshold
• Deduct 0.8% from Non-ATL withdrawals exceeding Rs. 50,000 per day
• Deposit the deducted amount with the FBR via the bank's monthly withholding return
• Issue a withholding tax certificate on request

Reconcile your bank's deduction against the WHT credit shown on your IRIS portal. Discrepancies are common, especially when ATL status changes mid-year or when withdrawals are made through multiple branches.

How Fair Tax International can help

Our ACCA-led Pakistan tax team handles end-to-end FBR compliance — from return filing and ATL maintenance to withholding tax reconciliation and FBR notice handling. If you're tired of paying Section 231AB on every cash withdrawal, the fix takes a single afternoon of paperwork. Book a free consultation and we'll get you on the ATL before your next withdrawal.