Govt plans to increase cash sales limit to Rs2.5m in Pakistan

The federal government has proposed to hike the limit from Rs200,000 to Rs2.5 million for disallowing expenditure attributable to cash sales exceeding Rs2.5 million per transaction.

The amendment to Section 24 of the Income Tax Ordinance 2001, which prevents the deduction of expenses for cash sales exceeding Rs200,000 has generated considerable concern within the business community.

Notably, the government has now proposed to implement this law in a phased manner to secure revenue collection alongside ensuring documentation.

Under the proposed revised law, the law would be fully implemented in three three-year periods in phases.

In the first year, the amount of Rs200,000 has been proposed to be increased to Rs2.5 million for disallowing expenditure per transaction.

Meanwhile, in the second year, the amount would be decreased from Rs2.5 million to Rs1.5 million and subsequently to Rs0.5 million.

The percentage of disallowance would be decreased from 50% to 20%, which would be slowly increased in three years, the new proposal said.

According to the sources, the disallowance introduced via Section 24 of the Income Tax Ordinance, 2001 pertains exclusively to the head “Income from Business,” as defined under Section 18.

It is worth noting that this provision disallows 50% of expenditure attributable to cash sales exceeding Rs200,000 per transaction as per the Finance Act 2025.

This results in the restriction applying solely to business income and does not apply to individuals or entities earning income under any other head.