Pakistan Caps Cash-on-Delivery Payments to Promote Digital Economy

The Federal Board of Revenue (FBR) has officially set a Rs200,000 cash limit for cash payments in both the retail and e-commerce sectors, including cash-on-delivery (COD) orders. The decision, outlined in Income Tax Circular No. 2 of 2025-26, aims to encourage digital transactions and move Pakistan toward a cashless economy.

Under the new directive, any sale of Rs200,000 or more must be settled through a banking channel or other approved digital means. If a payment of this amount is made in cash, 50% of the related business expenditure will be disallowed for tax purposes, according to Section 21(s) of the Income Tax Ordinance, 2001.

Tax experts have confirmed that this circular clarifies previous ambiguity, making it clear that the cash limit applies equally to both physical retail stores and e-commerce COD deliveries. However, the FBR also noted that if a customer deposits cash directly into a seller’s bank account against an invoice, the transaction will be considered a banking channel payment and will not be subject to the disallowance rule. This initiative is part of the government’s broader strategy to digitize the economy, improve tax compliance, and reduce the use of cash in large transactions.