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.
