Islamabad: The Federal Board of Revenue (FBR) has prepared a new simplified tax scheme for small traders and shopkeepers, which is expected to be introduced in the upcoming federal budget for fiscal year 2026-27, according to official sources and ongoing stakeholder consultations.
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 aims to offer a more straightforward and lower-tax alternative to the existing general tax regime.
Eligibility Criteria for Small Businesses
According to the proposal, eligible businesses must have been operating for at least three years, maintain a physical shop or business premises, and not be engaged in specialized professional services. Existing taxpayers who were filing returns before 2025 may also qualify if they meet the required conditions.
Easy Registration Through Digital Platforms
Registration under the proposed scheme will be facilitated through the FBR’s IRIS portal, a dedicated mobile application, as well as authorised tax practitioners and facilitators. This is intended to make the process easier and more accessible for small business owners.
Voluntary Participation With Basic Compliance
Participation in the scheme will be voluntary. However, registered taxpayers will be required to maintain basic records of sales, purchases, and expenses to ensure transparency and proper documentation.
The FBR has proposed a simplified tax structure for eligible businesses, with tax liability applicable once income crosses the defined threshold. The goal is to reduce the compliance burden compared to the standard tax system.
Reduced Compliance Requirements
To support small businesses, the proposal includes exemptions from mandatory point-of-sale (POS) system installation and other advanced digital reporting requirements.
At the same time, monitoring mechanisms will remain in place. Authorities are expected to conduct audits only in high-risk cases, such as unusual financial activity, unexplained bank transactions, or significant mismatches between declared income and actual spending.
Data Monitoring and Enforcement
The FBR will continue to use data from financial institutions and government databases to verify taxpayer information. Large inconsistencies may trigger further review or audit proceedings.
The proposed framework retains existing withholding tax rules and other legal obligations. Non-compliance or concealment of income may result in penalties and legal action.
Benefits for Small Taxpayers
Officials said the scheme is designed to encourage voluntary tax compliance, expand documentation of the informal economy, and bring more small businesses into the formal tax net.
Registered participants may also benefit from inclusion in the Active Taxpayer List (ATL), reduced withholding tax rates, and improved credibility in banking and commercial transactions.
