Islamabad: The Federal Board of Revenue (FBR) has prepared a new simplified tax scheme aimed at small traders and shopkeepers, which is expected to be introduced in the upcoming federal budget for fiscal year 2026-27, according to official developments and consultations currently underway with stakeholders.
Under the proposed Small Taxpayers Guidance System, the scheme will apply to businesses with an annual turnover of up to PKR 20 million. The initiative is designed to provide a more streamlined and lower-tax alternative to the existing general taxation framework.
As per the proposed criteria, eligibility will be extended to individuals who have been operating a business for at least three years, maintain a physical shop or business premises, and are not engaged in specialised professional services. Existing taxpayers who were already filing returns prior to 2025 may also be allowed to join the scheme if they meet the required conditions.
Registration under the proposed system will be facilitated through the FBR’s IRIS portal, a dedicated mobile application, as well as authorised tax practitioners and facilitators, making the process more accessible for small business owners.
Participation in the scheme will be voluntary. However, registered taxpayers will be required to maintain proper records of sales, purchases, expenses, and other business-related transactions to ensure basic financial transparency.
The FBR has proposed a reduced and simplified tax structure for eligible participants compared to the standard tax regime. Under the framework, tax liability will generally arise once annual income exceeds the prescribed threshold.
To reduce compliance costs, the proposal also includes exemptions from mandatory point-of-sale (POS) system installation and other advanced digital integration requirements for qualifying small businesses.
At the same time, the scheme includes monitoring mechanisms. Audits are expected to be limited to high-risk cases, including unusual financial activity, unexplained banking transactions, or significant discrepancies between declared income, assets, and expenditures.
Authorities will continue to cross-check taxpayer data using information from financial institutions and government databases. Large inconsistencies between declared income and actual financial activity may trigger further scrutiny or audit proceedings.
The proposed framework retains existing withholding tax obligations and other legal requirements under current tax laws. Non-compliance, concealment of income, or violation of scheme conditions may result in penalties and legal action.
Officials say the initiative is aimed at encouraging voluntary tax compliance, expanding the documentation of the informal economy, and bringing more small businesses into the formal tax net.
Registered participants may also benefit from Active Taxpayer List (ATL) status, reduced withholding tax rates, and improved financial credibility in banking and commercial transactions.
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