Who pays tax on cash withdrawal from a bank, above what amount, and do filers or ATM withdrawals count?

What does the law say?

Section 231AB of the Income Tax Ordinance, 2001 requires every banking company to deduct “advance adjustable tax” at 0.8% of the cash withdrawal from a person whose name is not appearing in the Active Taxpayers List. The deduction applies to “the sum total of the payments for cash withdrawal in a day, exceeding fifty thousand rupees”.

An Explanation at the end of the section settles one question directly: the Rs. 50,000 is the aggregate of cash withdrawals in a single day. It is not a per-transaction limit.

Three facts follow from the text:

Point	What section 231AB says
Who pays	Only a person not appearing in the Active Taxpayers List
Trigger	Total cash withdrawals in one day exceeding Rs. 50,000
Rate	0.8% of the cash withdrawal
Nature	Advance adjustable tax

The Ordinance used here is amended to 30 June 2026, so these are the rules for tax year 2027 (1 July 2026 to 30 June 2027). Section 231AB was inserted by the Finance Act, 2023 at 0.6%. The Finance Act, 2025 substituted 0.8%.

Do filers pay tax on cash withdrawal?

No, not under section 231AB. The section is limited in its own words to a person whose name is not appearing in the Active Taxpayers List. If your name is on the list, section 231AB does not apply to your withdrawals.

The older section 231A, “Cash withdrawal from a bank”, was omitted by the Finance Act, 2021. The footnote in the consolidated Ordinance shows that at the time it was omitted, its rate under Division VI of Part IV of the First Schedule was 0.6% for the person whose name was not appearing in the Active Taxpayers List. So the current section is not a replacement of a tax that every account holder paid immediately before 2021. The footnote history before that point is not traced on this page.

Do ATM withdrawals count?

Section 231AB does not mention ATMs, cheques, counters or any other channel. It uses the words “cash withdrawal” and “payments for cash withdrawal” without defining them further. The Ordinance text in this corpus therefore does not say whether an ATM withdrawal is treated differently from a counter withdrawal, and this page does not answer that question. Any bank practice on this point, or any instruction from the Federal Board of Revenue or the State Bank of Pakistan, is outside this corpus.

How does it work in practice?

The bank adds up the cash you withdraw in a day. Once the total goes past Rs. 50,000, it deducts 0.8%. Section 231AB applies the rate to “the sum total of the payments”, with Rs. 50,000 working as the trigger. The section does not describe taxing only the part above Rs. 50,000.

Because the deduction is advance adjustable tax, it is not the end of the matter. Section 168(1)(b) treats tax deducted under Chapter XII, where section 231AB sits, as tax paid by the person from whom it was deducted. Section 168(2) then allows a tax credit for that tax against the tax due on taxable income for the same tax year. Under section 168(5), a credit that cannot be used in the year is refunded under section 170.

Worked example (illustrative figures)

Bilal runs a small cloth shop in Multan. His name is not on the Active Taxpayers List. The amounts below are invented; the 0.8% rate and the Rs. 50,000 daily trigger come from section 231AB.

Monday. He withdraws Rs. 30,000 in the morning and Rs. 45,000 in the evening.

1. Daily total: Rs. 30,000 + Rs. 45,000 = Rs. 75,000.
2. Rs. 75,000 is more than Rs. 50,000, so the section applies.
3. Tax: 0.8% x Rs. 75,000 = Rs. 600.

Tuesday. He withdraws exactly Rs. 50,000. The total does not exceed Rs. 50,000, so no tax is deducted under section 231AB.

Wednesday. He withdraws Rs. 200,000 once.

1. Tax: 0.8% x Rs. 200,000 = Rs. 1,600.

Total deducted over the three days: Rs. 600 + Rs. 1,600 = Rs. 2,200. If Bilal files his return for tax year 2027, section 168 lets him claim Rs. 2,200 as a credit against the tax due on his taxable income for that year.

What if the rate is doubled because I am a non-filer?

It is not. Section 100BA says the collection or deduction of advance tax from a person not on the Active Taxpayers List is determined under the Tenth Schedule, and rule 1 of that Schedule normally increases withholding rates by one hundred percent. Rule 10, however, lists deductions to which the Tenth Schedule does not apply, and clause (ga) of that list is “tax deducted under section 231AB”. The rate stays at the 0.8% written in the section.

What if I withdraw from two different banks on the same day?

The Explanation to section 231AB speaks of “aggregate cash withdrawals in a single day” and obliges “every banking company” to deduct. It does not say whether withdrawals at two separate banks are added together. The old section 231A had a wider Explanation that expressly covered “aggregate withdrawals from all the bank accounts in a single day”; section 231AB does not repeat the words “from all the bank accounts”. The law in this corpus does not resolve how two banks would combine their figures.

Common mistakes

• Thinking every account holder pays. Section 231AB covers only people not on the Active Taxpayers List.
• Treating Rs. 50,000 as a per-withdrawal limit. The Explanation makes it a daily total.
• Expecting a doubled non-filer rate. Rule 10(ga) of the Tenth Schedule excludes section 231AB.
• Treating the deduction as lost money. It is advance adjustable tax, and section 168 gives a credit for it in a return.

What to check in the official text

Read section 231AB in full, the footnote to section 231A showing the omitted section, sections 100BA and 168, and rule 10 of the Tenth Schedule in the source PDF. Whether your name appears on the Active Taxpayers List on the day of withdrawal is a fact the Federal Board of Revenue publishes; the list itself is outside this corpus.