An official from the Federal Board of Revenue (FBR) has reportedly rubbished claims circulating on the media regarding the imposition of a staggering 20.5 percent tax on cash sales transactions exceeding Rs200,000. According to reports, these false claims came about after lawmakers introduced an amendment in the Finance Bill 2025.

Earlier this week, reports incorrectly claimed that for cash sales transactions larger than Rs200,000, the FBR would charge an “additional tax” of 20.5 percent on the entire amount. This means that for a cash sale transaction of Rs200,001, the FBR would have generated approximately Rs41,000 in revenues. Similarly, tax revenues for cash sales amounting to Rs500,000 and Rs1 million would have allowed the FBR to generate Rs102,500 and Rs205,000.

This resulted in widespread panic in business communities, causing companies and firms to issue notifications to their customers to ensure that any transactions made were in compliance with the aforementioned amendment.

The actual amendment intends to disallow 50 percent of claimed expenditures on the sales of goods valued over Rs200,000. However, it merits a mention that this disallowance is reportedly applicable only on transactions utilizing cash and non-banking methods as a mode of payment per single invoice. 

This law is expected to increase the taxable income of businesses, which could allow for the FBR to witness a surge in revenues. However, the move will decrease profit margins for businesses that are compliant with taxation laws.

FBR Chairman Rashid Mahmood Langrial outlined that the aforementioned law could not be withdrawn by the federal government at this point in time. Reports indicate that he told the Senate Standing Committee on Finance that that the National Assembly Standing Committee on Finance had approved the law and that changes can only be made in Finance Bill 2026.

Aside from garnering disapproval from the wider business community, Senator Sherry Rehman reportedly commented on how the PPP is not in favor of the aforementioned law.

Reports cite a senior official from the FBR who stated that the revenue watchdog has not deemed cash sales transactions exceeding Rs200,000 as “high risk”. Instead, the measure aims to increase the usage of banking channels to make transactions. 

As an example of how the new disallowance framework will function, consider a business that sold goods exceeding Rs200,000 in value to a customer that cost it only Rs50,000 to produce. Under the older tax regime, the entire Rs50,000 would have been excluded from taxable income. However, the new amendment results in only Rs25,000 being disallowed, causing taxable income to rise by Rs25,000.