Islamabad, 24 September 2025 — The Federal Board of Revenue (FBR) has formally resolved to challenge the Council of Islamic Ideology’s (CII) recent decision that deems the withholding tax on bank withdrawals and transfers as incompatible with Shariah. Sources within FBR say legal preparations are complete and the case will be moved to court shortly.

CII’s Verdict: Taxing One’s Own Money “Unjustifiable”

Under the leadership of Allama Dr. Raghib Hussain Naeemi, the CII concluded in a ruling that withholding tax imposed when individuals withdraw or transfer their own funds is “excessive and un-Islamic.” According to Dr Naeemi, after reviewing the issue through the lenses of the Quran and Sunnah, the council found no basis in Shariah to permit tax on one’s own money, insisting that “it is not permissible to deduct this amount in any way.”

This move by the CII has stirred substantial debate — especially because withholding tax on bank transactions has been a staple of Pakistan’s revenue framework, and any alteration may ripple into fiscal policy, public perception, and legal precedent.

FBR’s (Cautious) Response

At a press‐sideline interaction at its headquarters, FBR Chairman Rashid Mahmood Langrial declined an immediate reaction to the CII decision, stating that the matter would first be carefully reviewed before any official stance is declared. Insider sources, however, confirm that the authority has opted for a legal counter. Since withholding tax constitutes a vital revenue stream, FBR sees little option but to defend its position in court.

The Stakes: Revenue, Constitutional Limits & Shariah Interpretation

What’s at play here extends beyond taxation. If a court upholds the CII’s view, the government could lose a sizable revenue source. The ruling would also set a precedent in reconciling Pakistan’s dual system of state law and religious oversight — particularly on finance and individual rights.

Meanwhile, it’s notable that in the 2025 Finance Act, the withholding tax rate on cash withdrawals has been elevated to 0.8 percent. FBR Downloads Some observers fear that striking down withholding tax might open pathways for more informal, unmonitored financial flows, undermining efforts at documenting the economy. Others argue that taxing one’s own funds is a violation of individual property rights, especially when interpreted under religious law.

What to Watch Next

• Court filings & arguments — Which court will hear it (e.g. High Court, Supreme Court)? What legal grounds will FBR use to counter the Shariah claim?
• Political reactions — Whether opposition parties, religious scholars, or civil society weigh in.
• Revenue forecasts — If the ruling is reversed by courts, how big is the potential fiscal gap?
• Precedents — Could this embolden further challenges to tax law on religious or constitutional grounds?