ISLAMABAD – Several reports about 20.5% tax on cash sales over Rs2 lac were shared online, but FBR officials clear air on matter after tweaks in Finance Act 2025 which tightened noose around businesses dealing in cash.
Amid viral buzz and contrasting reports, officials clarified that while no direct tax has been imposed on high-value cash transactions, but mentioned Finance Act 2025 added new clause to the Income Tax Ordinance, 2001, restricting expense deductions related to such transactions.
As per new legislation, 50% of expenses claimed against any sale will be disallowed if the payment exceeds Rs2lac and is made in cash or through non-digital, non-banking channels, based on a single invoice.
Senate Standing Committee members were informed by FBR chief that legislation aims to promote digital and banking transactions and improve documentation within the economy.
Some government alliance members lamented move for denting businesses and traders who largely operate in cash. Industry experts have also raised concerns over the practical implementation of the amendment.
Many individuals and small associations of persons (AOPs) are not subject to mandatory audits if their turnover remains below Rs. 300 million. This raises concerns about enforcement and verification, making the policy difficult to monitor and possibly ineffective in raising tax revenues.
