FBR Eases Cash Transaction Rules for Businesses in Pakistan

ISLAMABAD – The Federal Board of Revenue (FBR) has announced that direct cash deposits into a seller’s bank account will now be treated as valid payments under the Income Tax Ordinance, 2001.

This decision follows confusion caused by a recent amendment warning that business payments of Rs 200,000 or more, made outside formal banking or digital channels, would lead to 50% disallowance of related business expenses. The policy sparked concern among traders, small businesses, and retailers who often rely on cash.

To address these concerns, the FBR clarified that cash deposits made directly into a seller’s bank account will not be penalized and will be considered traceable banking transactions. These payments are exempt from disallowance rules, bringing relief to cash-heavy sectors like retail, wholesale, and construction.

The FBR stated that the move is intended to support the transition to a more formal and documented economy, without causing unnecessary hardship for businesses that depend on cash.

However, payments exceeding Rs 200,000 must still go through traceable methods like bank transfers or direct deposits to be recognized under the law.

This policy adjustment is being seen as a win for the business community, providing a practical middle ground between pushing for digital payments and respecting the realities of Pakistan’s economy. While some critics argue it could slow down digitalization, others say it’s a realistic and necessary concession.

The FBR’s clarification helps avoid disruption and gives businesses confidence in making compliant transactions without being penalized for cash use.