Budget 2025-26: ‘Bank Deposit Interest Tax to increase for both filers, non-filers’

Budget 2025 26 Bank Deposit Interest Tax To Increase For Both Filers Non Filers

ISLAMABAD – Pakistani government is making all-out efforts to rake in revenue and in the latest boost, Federal Board of Revenue (FBR) proposed revised tax rate on interest income earned from deposits in commercial banks and savings schemes by 2 percent in the upcoming fiscal year 2025-26 budget.

A report shared by local media said the new proposal targets both tax filers and non-filers and comes as part of efforts to boost government revenue while providing relief to other sectors.

As of FY24-25, interest income from bank deposits is taxed at 15 percent for filers and 35 percent for non-filers. The proposed increase would raise these rates to 17 percent and 37 percent respectively, but final nod from IMF is due.

US based lender – which is technically chalking out reforms – requested detailed tax proposals to compensate for revenue shortfalls caused by concessions to salaried individuals and the shrinking formal economy. The government aims to balance relief efforts with maintaining tax revenue.

Meanwhile, savers are concerned as raising tax on interest income could adversely affect individuals who rely on savings and bank deposits for their income, especially since recent cuts in policy rates have already reduced bank returns. He further warned that commercial banks may face a decline in deposits if the tax burden increases.

Dr. Iqbal explained that current 15 percent tax rate applies to individuals whose annual interest income does not exceed Rs 5 million, while those earning more pay taxes according to their overall income brackets. Corporate interest income is taxed under company tax rates, which include surcharges.

The proposal is part of a broader strategy by the government and IMF to review all tax exemptions and bring various income sources in line with standard tax rates, aiming to increase fiscal revenues without undermining economic growth.

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