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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Pakistan’s Federal Board of Revenue (FBR) has clarified that section 21(s) does not impose a separate tax on a sale simply because it is paid in cash above Rs. 200,000. Instead, when a qualifying sale is paid for outside a banking channel or digital means, the provision can disallow 50% of the proportionate business expenditure attributable to that sale. That is an adjustment to deductible expenses—not a tax rate on the sale price.
What section 21(s) does—and does not do
Section 21(s) of Pakistan’s Income Tax Ordinance, 2001 concerns the deductibility of expenditure claimed in respect of a sale. The FBR’s Circular No. 01 of 2025-26 explains that 50% of the proportionate business expenditure attributable to a qualifying sale is disallowed if payment is not received through a banking channel or digital means. Read FBR Circular No. 01 of 2025-26.
The 50% figure applies to the relevant expenditure, not to the invoice total or gross sale proceeds. It is therefore not a 50% tax on the sale. A contemporaneous report described FBR as rejecting an alleged 20.5% tax on these cash sales; that figure is not the rate set by section 21(s). TechJuice’s report on the clarification.
This provision’s effect is limited to the treatment of claimed expenditure. It does not, on its own, remove any other income tax, sales tax, reporting, invoicing or withholding obligation that may apply to a transaction.
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Which threshold applies?
The official materials use different wording at the exact Rs. 200,000 boundary. FBR Circular No. 01 describes a sale of Rs. 200,000 or above on a single invoice. The consolidated Income Tax Ordinance text, amended up to 20 February 2026, says payment “exceeding two hundred thousand rupees” against a single invoice. Because those formulations differ at exactly Rs. 200,000, the available sources do not support stating a definitive boundary for that precise amount. See section 21(s) in the FBR’s consolidated Ordinance.
The statutory wording refers to a single invoice containing one or more transactions for the supply of goods or provision of services. It does not describe a threshold based simply on adding together unrelated sales across separate invoices.
How payment through a bank account is treated
FBR Circular No. 01 says that when a buyer deposits cash against invoices into the seller’s bank account, the payment is treated as made through a banking channel. FBR says no expenditure disallowance under section 21(s) will be made on that basis. The relevant distinction is how the seller receives payment—not whether physical cash was used at an earlier point before it reached the seller’s account. FBR Circular No. 01 of 2025-26.
How the clarification applies to e-commerce COD
FBR Circular No. 02 of 2025-26 says the Rs. 200,000 cash transaction limit for this purpose applies to both retail outlets and e-commerce cash-on-delivery orders. The circular states: “The limit for cash transaction for both shall be Rs. 200,000/- for this purpose.” Read FBR Circular No. 02 of 2025-26.
What remains unclear for expense calculations
FBR describes the potentially disallowed amount as “proportionate” expenditure “attributable” to the sale, but the cited official material does not set out a universal formula for assigning shared or indirect business expenses to a particular invoice. Businesses should not assume that the sources establish a single allocation method for every case.
The Ordinance source cited here is consolidated through 20 February 2026. The available materials do not establish whether a later 2026 enactment changed section 21(s), so readers should check the latest law and FBR instructions when making a current filing or compliance decision.
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