ISLAMABAD – A major update for the business community in Pakistan, as the Federal Board of Revenue (FBR) announced that direct cash deposits into a seller’s bank account will now be treated as valid payments under Income Tax Ordinance, 2001.
This comes after widespread confusion and concern over recent amendment which warned that payments of Rs2Lac or above, made outside formal banking or digital channels, would result in 50pc disallowance of related business expenses, sparking concerns among traders, retailers, and Small and Medium-sized Enterprises who rely heavily on cash transactions.
The country’s apex tax collection agency said cash deposits made directly into seller’s bank account will not trigger penalty, and it will be considered legitimate banking transactions, exempting them from the disallowance rule.
FBR officials said clarification aims to support the transition to a more formal and traceable economy, while avoiding unnecessary hardship for legitimate cash-based transactions.
Tax on cash transactions in Pakistan
Payments exceeding Rs2Lac must still go through traceable means. Cash Deposits are safe. As long as the cash is directly deposited into the seller’s bank account, it counts as a compliant transaction.
This means relief for businesses, especially in cash-heavy sectors like retail, construction, and wholesale. This development is being seen as a rare regulatory concession, and a win for the business community that had been bracing for the fallout of stricter compliance measures.
Critics question whether this move weakens the push for digitalization, while others argue it’s a practical balance between reform and reality. FBR’s latest move has turned heads, and softened the blow of what was shaping up to be a hardline policy shift.
