If a bank has ever deducted a small percentage when you withdrew a large amount of cash, you have already met Section 231AB. This advance tax targets cash withdrawals by people who are not on the Active Taxpayer List (ATL), and its rate was increased from 0.6% to 0.8% through the Finance Act 2025. This guide explains exactly when the tax applies, when it does not, and how to avoid paying it altogether — legally.
Try the calculator: Check a withdrawal amount instantly with our Cash Withdrawal Tax Calculator — Section 231AB.
What Is Section 231AB?
Section 231AB of the Income Tax Ordinance 2001 requires banking companies to deduct advance tax when a person who is not on the ATL withdraws cash above the prescribed threshold. The current threshold is based on aggregate cash withdrawals exceeding Rs. 50,000 in a single day, and the current rate is 0.8% of the amount withdrawn. Filers — persons on the ATL — are outside this section entirely: no 231AB tax is deducted from their cash withdrawals, whatever the amount.
The Rate and the Threshold — Worked Example
The mechanics are simple. If a non-ATL person withdraws Rs. 100,000 in cash in one day, the withdrawals exceed the Rs. 50,000 daily threshold, so the bank deducts 0.8% — that is Rs. 800. Withdraw Rs. 500,000 and the deduction is Rs. 4,000. Two points are often missed: first, the threshold looks at the day's aggregate cash withdrawals, so splitting one large withdrawal into smaller same-day pieces does not avoid it; second, the tax is on cash withdrawals — transfers, pay orders and account-to-account movements are not cash withdrawals under this section.
Who Pays and Who Does Not
The section applies to persons not appearing on the ATL — broadly, non-filers. It does not apply to filers on the ATL. Certain withdrawals and persons can also be exempt under specific provisions or certificates, but the everyday rule is simple: on the ATL, no deduction; off the ATL, 0.8% above Rs. 50,000 a day. If tax was deducted in a period when you were actually on the ATL, keep the bank certificate — the amount can be dealt with in your tax return, because the deduction is an advance tax, not a final penalty.
Is 231AB Tax Adjustable or Final?
Section 231AB is an advance tax. For a person who files a return, advance taxes are generally adjustable against the annual tax liability — meaning the Rs. 800 in the example is not lost money if you file; it is credited in your assessment and only the difference is payable (or refundable). For someone who never files, the deduction simply becomes a cost of staying outside the tax net — which is precisely the behaviour the section is designed to discourage. Our filer vs non-filer guide shows how these small leakages add up across banking, vehicles and property.
How to Legally Avoid the Cash Withdrawal Tax
There is no complicated planning involved: file your income tax return and stay on the ATL. Once your name appears on the Active Taxpayer List, Section 231AB no longer applies to your withdrawals. Our step-by-step guide on how to become a filer in Pakistan covers NTN registration, IRIS filing and ATL confirmation. Businesses that must deal in cash can also reduce exposure by routing payments through banking channels — cheques, online transfers and pay orders — which is better practice for audit trails in any case.
Common Mistakes
Common mistakes include using the old 0.6% rate in estimates (it is 0.8% now), assuming the threshold is per transaction rather than per day, believing the tax applies to filers (it does not), and discarding bank deduction certificates that are needed to claim the credit in a return. If your bank deducted 231AB while you were on the ATL, raise it with the bank and keep the documentation for your return.
Key Takeaways
- Section 231AB: 0.8% advance tax on cash withdrawals above Rs. 50,000 per day — only for persons not on the ATL.
- The rate rose from 0.6% to 0.8% through the Finance Act 2025.
- Filers pay nothing under this section; the threshold is on the day's total cash withdrawals.
- The tax is adjustable for filers — claim it in your return with the bank certificate.
- The legal way to avoid it entirely is to file your return and stay on the ATL.
Frequently Asked Questions
Does the 0.8% apply to the whole withdrawal or only the amount above Rs. 50,000?
The section is triggered when the day's aggregate cash withdrawals exceed Rs. 50,000, and the bank applies the rate to the withdrawal amount under the prevailing rules. Use the calculator for an estimate and confirm the exact treatment on your bank statement.
I am a filer but the bank still deducted. What should I do?
Check your ATL status for the relevant date first. If you were on the ATL, obtain the deduction certificate from the bank and claim the amount as advance tax in your return; also ask the bank to correct its record of your status.
Do ATM withdrawals count?
Cash withdrawals through any channel from your bank account are cash withdrawals for this purpose; the bank aggregates the day's cash outflows. Splitting across channels on the same day does not avoid the threshold.
Is there a similar tax on bank transfers or deposits?
Section 231AB is specifically about cash withdrawals by non-ATL persons. Other withholding provisions exist for various banking transactions, summarised in our Pakistan tax rates card 2026-27.
How Banks Apply the Rule in Practice
The deduction happens automatically at the bank's core system level: when your day's cumulative cash withdrawals cross Rs. 50,000 and your CNIC is not on the ATL feed the bank uses, the system deducts 0.8% and credits it against your CNIC with the FBR. You will see it as a separate debit line on your statement, and the bank issues a certificate of deduction for the year — download it from internet banking or collect it from your branch before filing season, because claiming the credit in your return requires the figure to match the FBR's records. If your status changes mid-year (you file and join the ATL), deductions should stop from the next list update; keep an eye on the first statement after your ATL confirmation.
231AB vs Other Bank-Related Taxes
Do not confuse 231AB with the other amounts banks handle. Tax on banking transactions and on profit from deposits or debt instruments are separate provisions with their own rates and their own ATL/non-ATL differences, and card payments abroad have their own advance tax as well. The common pattern is the same: every one of these provisions charges non-filers more, and almost every one becomes adjustable or disappears once you file and stay on the ATL. Our Pakistan tax rates card 2026-27 places them side by side so you can see the full cost of remaining a non-filer across a year of ordinary banking.
Related Guides
- Filer vs Non-Filer in Pakistan 2026-27
- What Is ATL Status in Pakistan?
- How to Become a Filer in Pakistan
Sources & review: The rates and rules in this guide are based on the Federal Board of Revenue (FBR), the Income Tax Ordinance 2001 and the amendments introduced through the Finance Act for 2026-27. File and verify your own return on FBR IRIS. This guide is for information only and is not professional tax advice. Last reviewed: October 2026.