ISLAMABAD – Pakistani authorities prooposed new tax law which targets undocumented sales and disallowance starts at Rs2.5Million.
In sweeping overhaul of tax laws targeting high-value cash transactions, the government set stage for major shift in how businesses operate across Pakistan.
Under dramatic amendment to Section 24 of the Income Tax Ordinance, 2001, the government is set to crack down on undocumented cash sales, raising disallowance threshold from Rs. 200,000 to a staggering Rs. 2.5 million per transaction, but only temporarily.
Over the next three years, this relief will vanish as the limit is slashed to Rs. 1.5 million and eventually just Rs. 500,000.
Furthermore, the expense disallowance will initially be reduced to 20pc, only to climb back up gradually, dealing a potential blow to businesses that continue large cash dealings.
This high-impact law will only affect businesses, not individuals or income under other heads, a clear sign that the government is laser-focused on increasing documentation and squeezing out the black economy.
Sources say this phased approach is a strategic balance: protecting revenue while forcing businesses into the tax net. But business leaders are already raising alarms, calling the move a ticking time bomb for industries reliant on large-scale cash transactions.
“This is just the beginning of the end for unrecorded sales,” one tax analyst warned. “The government is drawing a line in the sand.”
As the countdown begins, businesses are left scrambling to adapt, or face financial consequences.
