The Federal Board of Revenue (FBR) has issued a clarification confirming 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.

This clarification relates to the newly added clause (s) in Section 21 of the Ordinance. According to the clause, if a seller receives a payment of Rs. 200,000 or more on a single invoice and the payment is not made through formal banking channels or digital means, 50 percent of the corresponding business expense may be disallowed for tax purposes.

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However, the FBR has now officially stated that this rule does not apply when a buyer deposits the amount directly into the seller’s bank account. Such transactions will be considered valid payments made through the banking system.

The FBR explained that the clarification aims to promote the transition to a formal economy while recognizing direct cash bank deposits as legitimate and traceable financial transactions.