The Federal Board of Revenue (FBR) has officially clarified that cash payments deposited directly into a seller’s bank account by a buyer will now be accepted as valid transactions for tax purposes.
This clarification addresses concerns raised after the recent introduction of Clause (s) to Section 21 of the Income Tax Ordinance, 2001, which stated that business expenditures of Rs200,000 or more per invoice would be partially disallowed if not paid via formal banking channels or digital modes.
According to the FBR, this 50% disallowance rule will not apply if the payment is made via direct bank cash deposit, as this form of transaction is still part of the formal banking system.
The FBR emphasized that while it continues encouraging digital and traceable transactions, it also recognizes the practical realities of business operations, especially in cash-dependent markets.
This update offers much-needed clarity and relief to traders, wholesalers, and SMEs who often process high-value transactions through bank counter cash deposits.
The clarification supports the broader government agenda to move toward a documented economy, while easing compliance for taxpayers.