The Federal Board of Revenue (FBR) has clarified that cash deposits made directly by buyers into a seller’s bank account will be treated as valid payments under the Income Tax Ordinance, 2001.
The clarification is in reference to the new clause (s) added to Section 21 of the Ordinance, that if a seller receives a payment of Rs. 200,000 or more on a single invoice and it is not made through a formal banking channel or digital means, 50 percent of the related business expenditure will be disallowed for tax purposes.
The FBR has now confirmed that such disallowance will not apply where the buyer makes a direct cash deposit into the seller’s bank account. These deposits will be treated as valid payments through the banking system.
The FBR stated that the clarification aims to support the transition to a formal economy while acknowledging that bank cash deposits remain a legitimate financial transaction method.
