Islamabad: The federal government is considering a phased relaxation of the recently introduced restriction on deducting business expenses related to large cash sales, according to a news report.
Under the Finance Act 2025, Section 24 of the Income Tax Ordinance 2001 was amended to disallow the deduction of any expense associated with a single cash sale transaction exceeding PKR 200,000. This provision came into effect on July 1, 2025, and has drawn strong criticism from the business community for being overly stringent and difficult to implement.
In response to industry concerns, the government is now reviewing a proposal to raise the disallowance threshold to PKR 2.5 million per transaction — but only as the first step of a gradual, three-year transition plan. According to sources, the plan aims to strike a balance between promoting digital documentation and minimizing disruption to business operations.
Year 1: The threshold for disallowance would increase from PKR 200,000 to PKR 2.5 million.
Year 2: The limit would be reduced to PKR 1.5 million.
Year 3: The final threshold would be PKR 500,000.
Simultaneously, the proportion of disallowed expenditure would be lowered from 50% to 20% in the first year, with incremental increases thereafter.
The disallowance rule under Section 24 applies exclusively to income categorized as “Income from Business” under Section 18 of the Income Tax Ordinance. It does not impact individuals or companies earning income under other heads.
Officials believe that easing the implementation through phased limits and gradual enforcement will help improve tax compliance without stifling business activity, especially in cash-heavy sectors. The adjustment is also seen as a step toward incentivizing digital transactions and better documentation in Pakistan’s informal economy.
The Federal Board of Revenue (FBR) has not yet officially confirmed the proposed changes, but the move is expected to be part of wider consultations with trade bodies and tax advisors in the coming weeks.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
