Islamabad, August 13, 2025 – The Federal Board of Revenue (FBR) has formally set limit for cash payments of Rs200,000 for both retail outlets and cash-on-delivery (COD) orders in the e-commerce sector.
The decision is aimed at encouraging digital transactions and moving toward a cashless economy.
The directive, issued through Income Tax Circular No. 2 of 2025-26 on August 12, 2025, clarifies that the same transactional ceiling will apply to cash-based payments made at retail outlets as well as COD orders fulfilled by e-commerce platforms. The measure is aligned with Section 21(s) of the Income Tax Ordinance, 2001.
According to the FBR, any sale worth Rs200,000 or above must be settled via banking channels or approved digital means. If such payment is made in cash, 50 percent of the proportionate business expenditure related to the sale will be disallowed for tax purposes.
Tax experts noted that the latest circular resolves prior ambiguity about whether the COD segment in e-commerce was covered under the same cash limit as physical retail. “Now it is clear—COD payment for e-commerce deliveries is capped at Rs200,000, just like over-the-counter sales,” one tax advisor explained.
The change follows the Finance Act 2025, which inserted a new clause in Section 21 of the ordinance to prevent excessive cash transactions and ensure transparency. The FBR also emphasized that when a customer deposits cash against invoices directly into the seller’s bank account, the payment will be treated as a banking channel transaction, avoiding any expenditure disallowance under Section 21(s).
This initiative is part of the government’s broader strategy to digitize the economy, enhance tax compliance, and reduce reliance on physical currency in large-value transactions.