The Federal Board of Revenue (FBR) has introduced a transaction ceiling of Rs. 200,000 for cash-based payments in e-commerce Cash-on-Delivery (CoD) orders. The directive, issued through Circular No. 02 of 2025-26 (Income Tax) on August 12, 2025, brings online retail transactions under the same cash payment rules that already apply to brick-and-mortar retail outlets.
According to the FBR, the decision is a direct extension of Section 21(s) of the Income Tax Ordinance, 2001. Under these provisions, any cash payment above the defined threshold will not qualify as an allowable expense for tax purposes. The move reflects the government’s push to modernize payment systems and accelerate the shift toward a cashless economy.
The application of this limit to e-commerce transactions represents a significant regulatory step for Pakistan’s fast-growing online retail sector. By aligning digital and physical retail payment regulations, the FBR aims to remove loopholes that have allowed large transactions to bypass formal banking channels. Officials believe the measure will improve compliance, enhance payment traceability, and make it harder for businesses and individuals to underreport taxable income.
The Rs. 200,000 limit is also intended to strengthen the ecosystem for digital payments, particularly in the context of Pakistan’s broader economic digitization strategy. By capping cash-based CoD transactions, regulators expect to encourage both consumers and merchants to adopt alternative payment methods such as bank transfers, mobile wallets, and online payment gateways. This shift, in turn, could contribute to greater financial inclusion and more accurate economic documentation.
Industry analysts note that the CoD model remains dominant in Pakistan’s e-commerce market, largely due to consumer trust issues and limited penetration of digital payment solutions. However, they also point out that excessive reliance on cash hampers operational efficiency for merchants and increases the risk of theft and fraud during cash handling. The new limit is therefore seen as both a compliance measure and a step toward modernizing the country’s retail payment landscape.
For e-commerce platforms, the policy will require adjustments to their payment processing frameworks. Businesses may need to introduce stricter verification systems for high-value orders or implement incentives for customers to prepay through digital channels. Logistics providers handling CoD deliveries will also be impacted, as the reduced cash flow could alter cash management operations.
The FBR has stated that these changes are part of an ongoing series of reforms designed to enhance transparency in the economy and curb tax evasion. By reinforcing documentation and limiting untraceable transactions, the government expects to not only strengthen revenue collection but also improve the overall integrity of Pakistan’s financial system.
The new rule will apply nationwide, with enforcement beginning immediately upon the issuance of the circular. While some resistance from both consumers and merchants is anticipated, policymakers remain confident that the long-term benefits of digitized commerce will outweigh the initial challenges.