Islamabad: The Federal Board of Revenue (FBR) has notified a simplified and voluntary income tax regime for small shopkeepers, allowing eligible retailers to pay tax equivalent to 1% of their gross turnover instead of filing returns under the normal taxation regime.
The Special Procedure for Small Shopkeepers was notified through Income Tax SRO 1166 issued on Tuesday. The draft procedure was issued on July 14 for public objections and suggestions.
Under the scheme, individual retailers with annual turnover of up to PKR 200 million can opt to pay income tax based on 1% of their gross turnover.
Participating retailers, however, will be required to pay a minimum cash tax of PKR 25,000, even if the tax deducted at source exceeds their liability. Any excess withholding tax will not be refundable.
The scheme is optional, allowing eligible shopkeepers to either join the simplified regime or continue filing income tax returns under the existing tax law. Registration will be available through the FBR’s IRIS portal, a dedicated mobile application or tax offices.
The procedure excludes retailers whose turnover exceeded PKR 200 million in any of the preceding three years, owners of more than one shop, Tier-I retailers, jewellers and professionals, including doctors, engineers and lawyers.
Retailers who filed tax returns for 2025 can opt for the scheme only if their tax liability is not lower than that of the previous year. The procedure also bars businesses from splitting or renaming their operations to qualify for the scheme. To encourage participation, retailers opting for the simplified regime will generally remain outside the routine audit framework.
However, departmental proceedings may be initiated after consultation with representatives of trade associations where tax authorities receive third-party information concerning significant economic transactions, ownership of expensive assets or misuse of the scheme for tax avoidance.
Participants will also be exempt from withholding tax obligations on purchases under Section 153 of the Income Tax Ordinance. The minimum tax provisions under Section 113, as well as the 1.25% minimum tax applicable under the normal regime, will also not apply to retailers covered by the scheme.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
