FBR Enforces Tighter Restrictions on Business Cash Transactions

The Federal Board of Revenue (FBR) has shared new guidelines with businesses for the fiscal year 2026, aiming to discourage large cash transactions and encourage formal documentation. These changes fall under Section 21 of the Income Tax Ordinance and are directed at all business sectors, including importers, vendors, and manufacturers.

Under the revised rules, any cash payment exceeding PKR 200,000 will no longer be treated as a fully deductible business expense. Instead, only 50 percent of such payments will be allowed when calculating taxes. The remaining portion will not only be disallowed but will also be subject to additional taxation.

This adjustment means that partially disallowed cash expenses could lead to a 20.5 percent increase in the effective cost. If the entire amount is disallowed, the financial impact could be as high as 79.5 percent.

The move signals the FBR’s intent to push businesses towards digital and documented transactions, making it more costly to operate outside formal financial channels.