Massive Hike in Bank Transaction Taxes and Service Charges Begins

The federal government has formally started implementing higher tax deductions on bank transactions, with a particular focus on non-filers. Simultaneously, commercial banks have also raised their service charges, sparking frustration among customers across the country.

Tax Increase for Non-Filers

Under the new policy, non-filers withdrawing cash from bank counters are now being charged 0.8% withholding tax, up from the previous 0.6%. For instance, withdrawing Rs. 20,000 now results in a deduction of Rs. 522.

Additionally, even cash withdrawals via cheques are now subject to taxation. These measures are part of the government’s budget strategy for FY 2025–26, aimed at broadening the tax net.

Surge in Bank Service Charges

Banks, without distinguishing between filers and non-filers, have significantly increased their ATM fees, debit card issuance charges, SMS alert services, and other transaction costs:

• ATM fee for using another bank’s machine has risen from Rs. 18 to Rs. 23 and now to Rs. 34 per transaction.
• ATM card fee has increased by Rs. 700.
• The SMS alert fee has gone up from Rs. 1,200 to Rs. 2,000, a hike of Rs. 800.

These new charges have been introduced despite the State Bank of Pakistan (SBP) clarifying that the latest updates from 1LINK (the interbank network) will be implemented from August 1, 2025. However, most banks have already started applying these higher rates.

New Withdrawal Limits

Banks have also updated the daily ATM cash withdrawal limits according to the category of debit card being used:

• Standard debit card holders: Rs. 25,000 to Rs. 50,000/day
• Premium cardholders: Up to Rs. 500,000/day
• Foreign currency debit card holders: $200 to $500/day

Withdrawals over Rs. 50,000 in a single day will automatically trigger tax deductions.

International ATM Charges

Customers using international ATMs will now be charged based on either:

• A set charge specified by the bank, or
• A percentage of the withdrawn amount, depending on the bank’s policy.

Growing Public Frustration

The sudden rise in banking fees and tax deductions has led to heated confrontations between bank staff and customers. In response, banks have requested 1LINK to reconsider and revise the updated fee schedule, warning that such increases could discourage digital transactions and push people back toward a cash-based economy.

Final Word

With these new tax rates and banking fees in place, everyday financial transactions have become more expensive, particularly for the salaried and middle-income segments. Experts warn that unless these charges are reviewed, the overall trust in digital banking may decline, weakening the government’s push for a more formalized financial system.