In an important clarification for businesses and taxpayers, the Federal Board of Revenue (FBR) has confirmed that cash deposits made directly by buyers into a seller’s bank account will be considered valid payments under the Income Tax Ordinance, 2001.
This update comes in response to confusion surrounding the recent insertion of clause (s) to Section 21 of the Ordinance. The clause states that any single invoice payment of Rs. 200,000 or more must be made through a formal banking channel or digital means. Otherwise, 50% of the associated business expenditure would be disallowed for tax purposes.
However, in a recent statement, the FBR has clarified that direct cash deposits into a seller’s bank account qualify as a legitimate banking transaction. Therefore, such payments will not trigger the 50% disallowance rule, easing concerns for both buyers and sellers operating within Pakistan’s informal economy.
This move is seen as a balanced step toward promoting digitized transactions without penalizing those still reliant on conventional banking methods. The FBR noted that while encouraging the use of formal channels is essential for a transparent economy, bank counter cash deposits remain a legitimate form of payment.
The clarification is part of a broader effort by the FBR to ensure smoother tax compliance and reduce misunderstandings within the business community. It also aligns with the authority’s ongoing campaigns to bring more transparency and documentation into financial transactions.
The FBR also recently extended the deadline for sales tax integration for Tier-1 retailers, another signal of its intent to provide businesses with the necessary time and flexibility to adapt to new reforms. Source: Dawn News
For further reading on the Income Tax Ordinance, 2001 and legal interpretations, refer to Wikipedia’s detailed entry on Pakistani Tax Law.
 has clarified that cash deposits made directly by buyers into a seller’s bank account){kind=link}