FBR caps cash payments at Rs200,000 for retail and e-commerce transactions

The Federal Board of Revenue (FBR) has formally imposed a limit of Rs200,000 on cash payments for both retail purchases and cash-on-delivery (COD) transactions in the e-commerce sector. The move is part of Pakistan’s ongoing strategy to encourage digital payments and gradually shift towards a cashless economy.

The directive, issued through Income Tax Circular No. 2 of 2025-26 on August 12, 2025, makes it clear that the cash ceiling applies equally to in-store retail transactions and COD orders fulfilled by e-commerce platforms. The measure is rooted in Section 21(s) of the Income Tax Ordinance, 2001, which aims to limit cash-based dealings and bring greater transparency into business transactions.

Under the new rule, any transaction worth Rs200,000 or more must be settled via banking channels or through approved digital payment systems. In cases where businesses accept cash for such high-value sales, 50 percent of the related business expenditure will not be admissible for tax purposes. This provision is intended to discourage large-scale cash transactions that make tax compliance and traceability difficult.

Tax specialists have welcomed the clarification, noting that earlier confusion surrounded the applicability of the rule to e-commerce deliveries. “There was a grey area on whether COD transactions fell under the same restriction as physical retail sales. With this circular, the FBR has made it explicit—cash payments in e-commerce cannot exceed Rs200,000 either,” a leading tax advisor said.

The measure builds upon amendments introduced in the Finance Act 2025, which added provisions to Section 21 of the ordinance to curb excessive cash usage and strengthen audit trails. By tightening restrictions, the government is signaling its commitment to digitization and improved monitoring of business transactions.

The FBR further clarified that if a customer deposits cash directly into a seller’s bank account against an invoice, such payments will be treated as banking transactions and not subject to disallowance under Section 21(s). This provision provides businesses with a viable alternative for customers who still prefer to pay in cash but ensures the funds are recorded within the formal banking system.

Industry analysts believe this initiative will accelerate digital adoption in Pakistan’s retail and e-commerce markets, particularly at a time when fintech solutions and online payment platforms are growing rapidly. By capping large-scale cash dealings, the government is pushing both merchants and consumers toward greater reliance on electronic transactions, enhancing efficiency, transparency, and accountability in the economy.

This step aligns with global practices where tax authorities encourage digital payments to minimize risks associated with untracked cash transactions. For Pakistan, it represents another milestone in its digital transformation journey, aiming to reduce reliance on cash while fostering trust in regulated payment systems.

Hot this week

Bithumb Accidentally Distributes $44 Billion in Bitcoin, Sparks Market Volatility and Regulatory Action

South Korean crypto exchange Bithumb mistakenly distributed over $40 billion worth of bitcoin as promotional rewards, causing a sharp selloff and prompting regulators to review crypto exchange controls.

ABHI Microfinance Bank Drives Pakistan’s Fintech Growth with Embedded Finance and Payroll Technology

ABHI Microfinance Bank, a Special Technology Zones Authority enterprise, is transforming Pakistan’s digital finance ecosystem with API-driven embedded finance and real-time payroll solutions.

Dr Kabir Ahmed Sidhu Assumes Charge as SECP Chairman, Sets Reform-Driven Agenda for Pakistan’s Financial Sector

Dr Kabir Ahmed Sidhu takes charge as SECP Chairman, pledging reforms in insurance, capital markets, non-banking finance, and digital transformation to enhance financial inclusion and economic growth.

Fintech and Banking Leaders to Convene in Riyadh to Rethink MSME Lending Models

Banking and fintech leaders will gather in Riyadh on February 10 to discuss structural challenges in MSME lending and explore scalable, data-driven credit solutions.

KWSC Launches Unified Mobile App and Migrates Bill Collection to 1BILL Platform for Real-Time Digital Payments

Karachi Water & Sewerage Corporation launches its Unified Mobile App and shifts bill collection to the 1BILL platform, enabling real-time digital payments, wider payment channels, and improved service reliability across Karachi.

Topics

Bithumb Accidentally Distributes $44 Billion in Bitcoin, Sparks Market Volatility and Regulatory Action

South Korean crypto exchange Bithumb mistakenly distributed over $40 billion worth of bitcoin as promotional rewards, causing a sharp selloff and prompting regulators to review crypto exchange controls.

ABHI Microfinance Bank Drives Pakistan’s Fintech Growth with Embedded Finance and Payroll Technology

ABHI Microfinance Bank, a Special Technology Zones Authority enterprise, is transforming Pakistan’s digital finance ecosystem with API-driven embedded finance and real-time payroll solutions.

Dr Kabir Ahmed Sidhu Assumes Charge as SECP Chairman, Sets Reform-Driven Agenda for Pakistan’s Financial Sector

Dr Kabir Ahmed Sidhu takes charge as SECP Chairman, pledging reforms in insurance, capital markets, non-banking finance, and digital transformation to enhance financial inclusion and economic growth.

Fintech and Banking Leaders to Convene in Riyadh to Rethink MSME Lending Models

Banking and fintech leaders will gather in Riyadh on February 10 to discuss structural challenges in MSME lending and explore scalable, data-driven credit solutions.

KWSC Launches Unified Mobile App and Migrates Bill Collection to 1BILL Platform for Real-Time Digital Payments

Karachi Water & Sewerage Corporation launches its Unified Mobile App and shifts bill collection to the 1BILL platform, enabling real-time digital payments, wider payment channels, and improved service reliability across Karachi.

LUMS Center for Digital Assets Research Partners with Binance Academy for Crypto Seminar

LUMS CEDAR, in collaboration with Binance Academy, invites participants to a seminar on cryptocurrency fundamentals, blockchain technology, and digital assets on 9th February 2026 at LUMS.

QSPL and Unikrew Solutions Join Forces for AI-Driven Digital Identity and Interoperable Finance

QSPL partners with Unikrew Solutions to enhance Pakistan’s digital financial ecosystem through AI-driven onboarding, biometrics, and interoperable agent-based services aligned with SBP’s Agent Interoperability Framework.

Abhi Microfinance Bank and 1LINK Introduce 1GO Raast P2M Digital Payments

Abhi Microfinance Bank and 1LINK collaborate to launch 1GO Raast P2M services, enabling merchants to accept seamless digital payments and promoting cashless transactions across Pakistan.
spot_img

Related Articles

Popular Categories

spot_imgspot_img