FBR Cuts 50% Expense for Cash Sales Over Rs200K

Islamabad, August 5, 2025, 02:37 PM PKT — The Federal Board of Revenue (FBR) has rolled out a stringent new rule, outlined in an income tax circular issued Monday, disallowing 50% of business expenditure for sales of Rs200,000 or more on a single invoice if payment bypasses banking or digital channels, aiming to boost tax compliance and curb informal transactions, per official data. Under the Finance Act, 2025, a new clause (q) in Section 2L of the Income Tax Ordinance, 2001, disallows 10% of expenditure on purchases from unregistered suppliers (lacking a National Tax Number or NTN), targeting the formal sector’s growth over the informal sector, excluding agricultural produce unless via intermediaries.

The 50% disallowance holds unless cash is deposited into the seller’s bank account, deemed a banking channel payment. A new clause (s) in Section 21 further disallows depreciation expenses on capital assets acquired without withholding taxes under sections 152 or 153, excluding such payments from tax depreciation costs. Web context on tax enforcement shows mixed success, while posts found on X reflect concern and resistance—some fear business burdens, others question feasibility. Critically, the narrative of “compliance improvement” may mask implementation gaps—web data hints at past enforcement issues, and X sentiment suggests distrust in effective rollout, pointing to potential challenges.