What happens if a customer pays more than Rs. 200,000 in cash on delivery?

A large cash payment does not create a new tax, but it can cost you half of the expenses you would otherwise claim against that sale. Section 21(s) of the Income Tax Ordinance, added by the Finance Act, 2025, is a rule about deductions. It applies for tax year 2027, which covers income earned from 1 July 2026 to 30 June 2027, under the Ordinance as amended to 30 June 2026.

What does the law say?

Section 20(1) allows a deduction for expenditure incurred wholly and exclusively for the purposes of business when computing income under the head “Income from Business”. Section 21 then lists amounts that are not deductible “except as otherwise provided in this Ordinance”. Clause (s) disallows:

fifty percent of the expenditure claimed in respect of sale where the taxpayer received payment exceeding two hundred thousand rupees otherwise than through a banking channel or digital means against a single invoice containing one or more than one transactions of supply of goods or provisions of services.

Broken into parts, the clause bites when:

Element	What the clause says
Amount	payment received exceeding Rs. 200,000
Channel	otherwise than through a banking channel or digital means
Unit	against a single invoice, which may contain one or more transactions
Consequence	50% of the expenditure claimed in respect of that sale is not deductible

Digital means is defined in section 2(17B): digital payments and financial services including online payment portals, online interbank fund transfers, online bill and invoice payment, over the counter digital payment services, and card payments through point of sale terminals, QR codes, mobile devices, ATMs or kiosks. The Ordinance does not define “banking channel” in section 2.

When does it matter for an online seller?

Section 21 works only where income is computed under the head Income from Business. That is where the interaction with section 6A comes in.

• Section 6A receipts taxed as final. Section 6A taxes payments for digitally ordered goods or services at a rate applied to gross receipts. Section 8(1) makes a section 6A tax a final tax on the amount, and section 8(1)(b) says no deduction is allowable for expenditure incurred in deriving that amount. With no deduction to claim, section 21(s) has nothing to reduce.
• Section 6A tax that is adjustable. Section 6A(3) makes the tax adjustable for a person whose turnover in a tax year exceeds Rs. 200 million, and lets a person with turnover up to Rs. 200 million opt out of the final tax regime when filing the return for tax year 2027 onwards. Where the tax is adjustable, income is computed with deductions, and section 21(s) can apply.
• Sales that are not digitally ordered. Walk-in or phone sales outside section 6A are computed under the business head, so section 21(s) can apply to them.

Worked example (illustrative figures)

Kamran sells refurbished laptops in Rawalpindi through his website and has opted out of the final regime for tax year 2027, so his business income is computed with deductions. A buyer orders a gaming laptop for Rs. 350,000 and pays the full amount in cash to Kamran’s own delivery rider at the door, against one invoice.

Step 1, test the amount: Rs. 350,000 exceeds Rs. 200,000.

Step 2, test the channel: cash handed over, not a banking channel or digital means.

Step 3, expenditure claimed against the sale: purchase cost and repair parts Rs. 310,000. Clause (s) does not set out how expenditure is attributed to a single sale, so this figure is illustrative.

Step 4, disallowed amount: 50% x Rs. 310,000 = Rs. 155,000.

Step 5, profit from this sale for tax purposes: Rs. 350,000 minus the allowed Rs. 155,000 = Rs. 195,000, against an actual profit of Rs. 350,000 minus Rs. 310,000 = Rs. 40,000.

Step 6, increase in taxable income: Rs. 195,000 minus Rs. 40,000 = Rs. 155,000.

Had the buyer paid by bank transfer or card, Step 2 would fail and the full Rs. 310,000 would remain deductible, subject to the rest of the Ordinance.

What if …?

What if the buyer pays cash to a third-party courier on cash on delivery? The Ordinance does not say whether clause (s) looks at how the buyer paid the courier or how the courier remitted the money to you. That question is left open by the text.

What if the buyer pays Rs. 150,000 in cash and Rs. 200,000 by bank transfer on one invoice? Clause (s) speaks of “payment exceeding two hundred thousand rupees otherwise than through a banking channel or digital means”. On the text, the cash part is Rs. 150,000, which does not exceed Rs. 200,000. The clause does not deal with split payments expressly.

What if the order is split over several invoices? Clause (s) tests each single invoice. It does not address invoices that are split, and this page does not suggest splitting.

Common mistakes

• Reading it as a penalty or extra tax. It is a limit on deductions under section 21.
• Applying it to final-regime receipts. Section 8(1)(b) already allows no deduction for them.
• Thinking all of the sale’s expenses are lost. Only fifty percent of the expenditure claimed in respect of that sale is disallowed.
• Treating a card or QR payment as cash. Section 2(17B) treats these as digital means.

What to check in the official text

Read section 21(s) with the opening words of section 21, section 20(1) for the general deduction rule, section 2(17B) for digital means, and section 6A(3) with section 8(1) for when section 6A receipts are final. The Ordinance version amended to 30 June 2026 governs tax year 2027.