Withholding Tax on Bank Transactions in Pakistan 2025-26

All Banking Withholding Taxes — Rates & Sections

Why Banks Deduct Withholding Tax

Under the Income Tax Ordinance 2001, banks and financial institutions are designated withholding agents. This means they are legally required to collect income tax on behalf of FBR at the point of transaction — before crediting your account.

The WHT collected by banks is not a separate bank charge — it is income tax collected on FBR's behalf. The bank deposits it with FBR and issues you a certificate or statement of WHT deducted, which you use to claim credit in your annual return.

Section 231A — Cash Withdrawal Tax

Section 231A imposes withholding tax on cash withdrawals from bank accounts above a daily threshold. It applies to withdrawals from counters, ATMs, and any other cash disbursement method.

Read the full Cash Withdrawal Tax guide for the daily threshold mechanics, ATM vs counter rules, and worked examples.

Section 151 — Profit on Savings Accounts

Section 151 covers withholding tax on profit earned on any profit-and-loss sharing account, savings account, term deposit receipt (TDR), or other debt instrument from a bank or financial institution.

Section 151 WHT is an advance tax — it is credited in your annual income tax return. The profit is also declared as income under "Income from Other Sources" and taxed at the applicable income tax slab rate. The 15% already withheld offsets the slab rate tax.

Read the full Savings Account Tax guide for Zakat deduction interaction, Islamic banking accounts, and return declaration.

Section 156 — Prize Bond Withholding Tax

Section 156 requires the State Bank of Pakistan and prize bond encashment agents to deduct withholding tax on prize bond winnings at the time of payment.

Read the full Prize Bond Tax guide for denomination-specific prize tables, declaration in annual return, and how to encash prize bonds correctly.

Section 150 — Dividend Withholding Tax

Section 150 covers WHT on dividends paid by companies, mutual funds, and other entities distributing profits to shareholders.

Dividend WHT is an advance tax and is credited in your annual return. Declare dividend income under "Income from Other Sources" and credit the WHT already deducted by the paying company.

Advance Tax vs Final Tax — What Banking WHT Is

Understanding whether a WHT is an advance tax or final tax determines whether you can recover it through your annual return:

How to Activate the Filer Rate at Your Bank

Banks apply WHT rates based on the filer status associated with your CNIC-linked account. The process to ensure you get the lower rate:

1. Register on FBR IRIS and file your return. Visit iris.fbr.gov.pk, register with your CNIC, and file any return (nil is fine).
2. Verify ATL status. Visit atl.fbr.gov.pk and confirm your CNIC shows as an active filer. ATL updates every Monday.
3. Visit your bank branch. Bring your CNIC, ATL printout, and NTN certificate (downloaded from IRIS). Request the branch update your account records to reflect your filer status.
4. Submit a self-declaration if required. Some banks require a signed filer status declaration form — available at the branch.
5. Confirm the update was applied. Check your next transaction statement to verify the lower WHT rate was applied.

Declaring Banking WHT in Your Annual Return

All banking WHT deductions should be declared and credited in your annual FBR income tax return:

• Obtain annual bank statements showing total WHT deducted for the tax year.
• Log in to FBR IRIS and open your annual return.
• Declare bank profit under "Income from Other Sources" at the full gross amount (before WHT).
• Enter total Section 151 WHT deducted under "Advance Taxes — Section 151."
• Declare cash withdrawal WHT under "Advance Taxes — Section 231A."
• Declare prize bond and dividend WHT in respective advance tax sections.
• IRIS nets all advance taxes against your total liability — excess generates a refund claim.

Common Banking Tax Mistakes in Pakistan

• Not informing the bank of NTN/filer status — bank applies non-filer rates by default.
• Not filing a return after significant WHT deductions — losing advance tax credit and refund opportunity.
• Assuming mobile load tax is affected by filer status — Section 236 applies at 15% to everyone equally.
• Not collecting annual WHT certificates from banks — needed for return filing and credit claim.
• Declaring only net profit (after WHT) in the return instead of gross profit — understates income and misses WHT credit.
• Not updating bank records after getting on the ATL — bank continues applying non-filer rates.

Related Banking Tax Guides

Useful Tax Tools & Guides

Official FBR Resources

Summary

Banks in Pakistan deduct withholding tax on cash withdrawals, savings profit, prize bonds, dividends, and other transactions. For most of these, filer status halves or more than halves the rate. All banking WHT is advance tax — creditable in your annual return.

Register on FBR IRIS, file any return, inform your bank of your filer status, and declare banking income in your annual return. These four steps ensure you pay the minimum legally required banking tax and can recover any excess.